Is Japan Really Dumping U.S. Treasuries? Here’s The REAL Reason Why Yields Keep Rising
Adam Taggart | Thoughtful Money® Aug 13, 2026
Summary
Japan can defend the yen by pledging Treasuries as repo collateral to obtain dollars, avoiding direct Treasury selling pressure.
Rising yields likely reflect a bond supply-demand imbalance from heavy government debt issuance plus hyperscaler AI-driven corporate borrowing.
Long-term yields are pushed by both inflation expectations and a term premium; current levels look stretched versus the inflation anchor.
Real yields near 3% on 30-year TIPS offer an attractive return alternative when CAPE-implied equity returns sit flat to negative.
Once oil volatility settles, yields may revert toward their fundamental inflation-expectations anchor rather than stay elevated.
Adam Taggart's takeaways
- Top takeaway As host, Taggart frames the discussion around whether the factors pushing Treasury yields higher — supply crowding out and Japan's actions — are transitory
- He steers the conversation toward technical questions about how Japan is actually intervening in the yen market
Michael Lebowitz's takeaways
- Top takeaway Lebowitz argues Japan isn't actually selling U.S. Treasuries outright — they're likely using repos and Fed facilities to get dollars while defending the yen, a lesson learned from the August 2024 yen carry trade unwind that hurt U.S. markets
- He sees a bond supply-demand imbalance as the main yield driver, citing both government debt rollovers and a 'massive wave of borrowing from the hyperscalers' for the AI build-out boom
- Real yields look very attractive in his view — investors can lock in 3% on a 30-year TIPS on top of inflation, versus 10-year equity expected returns he reads as flat to negative on a CAPE basis
- He doesn't believe inflation expectations are the culprit — 5/10/30-year inflation expectations sit roughly where they were before Iran, with the recent rise only in 1-year expectations
- He expects yields to mean-revert to the inflation expectations anchor once oil market volatility calms down, since deficit and supply concerns have stretched yields well beyond that fundamental anchor