The signals of Japan's economy over the past two months have been somewhat unusual.

On the surface, seemingly insignificant numbers actually hide major problems: a debt ratio of 263% has approached a critical threshold, and the 10-year government bond yield at 1.97% has hit its highest point since 2007. While experts' statements may sound somewhat alarmist, they indeed reflect a reality — the world's third-largest economy is heading toward a "debt endgame."

Japan's predicament is layered. One-third of annual tax revenue is used to pay debt interest, money that should be allocated to infrastructure or social welfare. Even more troubling are policy traps: raising interest rates to stabilize the yen would crush the fiscal situation; maintaining low interest rates would allow import inflation to erode consumers' purchasing power. Under this dilemma, the economy continues to decline, with the latest GDP data plunging at an annualized rate of 1.8%, domestic demand and exports nearly stalling simultaneously, and with the US imposing a 15% high tariff, Japanese export companies are facing tough times.

But the truly alarming change is happening in capital flows. Japanese institutions hold $3.2 trillion in overseas assets. Previously, these funds stayed abroad because domestic yields were too poor. Now, the situation has reversed — Japanese government bonds are beginning to offer attractive returns. What does this mean? It suggests that over $8 trillion could suddenly be withdrawn from the global market back to Japan.

Once liquidity tightens, the consequences will quickly become apparent. Some institutions estimate that US stock valuations could be compressed by 24%. As the most risk-sensitive asset class, the crypto market has already reacted early — BTC once dropped below $86,000, with 180,000 traders forced to liquidate within 24 hours, and $600 million in funds evaporating from the market.

The Bank of Japan is now caught between a rock and a hard place. On one side, it plans to reduce its government bond purchases, aiming to cut monthly bond buying to 2 trillion yen by 2027, which would push up market interest rates; on the other side, it must prevent rates from rising too quickly to avoid financial turmoil. These two goals are fundamentally contradictory. This contradiction is intensifying market panic.

From a global asset allocation perspective, when the world's largest creditor shifts from a buyer to a seller, the entire asset pricing logic will be reshaped. BTC will inevitably face ongoing liquidity tightening pressures.

What should be done operationally? First, strictly control positions, with no more than 20% in a single coin, so that even if volatility occurs, it won't damage the fundamentals. Second, closely monitor the yen exchange rate and capital flow data, as these are early signals of market shifts. Third, consider using put options to hedge risks.

Pay special attention to one number: will Japan's government bond yield break through 2%? If it does, it means Japan's domestic attractiveness has become strong enough, and the gate for global capital to flow back might truly open, potentially triggering a liquidity crisis.