Japan is Hitting the Debt Endgame, and the Shockwave Will Hit the United States

In a recent video posted on X by economist Peter St Onge, PhD (@profstonge), he warns that Japan is approaching a critical tipping point in its long-standing battle with government debt. Titled “Japan Nears Debt Crash,” the video highlights how decades of aggressive stimulus and money printing have pushed the nation to the brink, with potential global repercussions. As St Onge puts it, Japan is “closing in on the government debt endgame,” and the fallout could send shockwaves across the Pacific, directly impacting the United States through asset dumps and financial market turmoil. Drawing from St Onge’s analysis and supported by historical data, this article examines Japan’s fiscal trajectory over the past 30 years, its holdings of U.S. debt, and the severity of the potential economic ripple effects on America.

Japan is hitting the debt endgame as bond yields soar to a 40 year high.

Investors are worried Japan can’t handle a debt that already consumes 1/3 of taxes in interest payments. And could soon go to 2/3.

And if Japan crashes, they could dump $3 trillion of US assets. pic.twitter.com/3rSJiKEwBv

— Peter St Onge, Ph.D. (@profstonge) December 10, 2025

Japan’s Debt Spiral: A 30-Year Chronicle of Money Printing and Borrowing

Japan’s economic woes trace back to the late 1980s, when the Bank of Japan (BOJ) manipulated interest rates to fuel a massive asset bubble. At its peak, land values in Tokyo surpassed those of the entire United States, and the grounds of the Imperial Palace were worth more than all of California. Japanese firms snapped up global assets, from Hollywood studios to Rockefeller Center. But as St Onge notes, central bank-driven booms are fleeting “tissue fires” that burn bright and short. The bubble burst in 1990, plunging Japan into decades of stagnation known as the “Lost Decades.”In response, Japan embarked on an unprecedented campaign of fiscal stimulus and monetary expansion. Over the past 35 years, the country has rolled out stimulus packages totaling more than half of its GDP—equivalent to about $15 trillion in U.S. terms. Interest rates were pinned near zero, and the BOJ engaged in massive quantitative easing, buying up government bonds and even equities to prop up the economy.

This approach has ballooned Japan’s government debt to staggering levels. According to historical data, Japan’s debt-to-GDP ratio has climbed relentlessly:

Projections suggest it could remain above 250% through 2030 if trends continue.

Fueling this debt has been aggressive money printing. Japan’s M2 money supply—a broad measure including cash, deposits, and other liquid assets—has expanded dramatically over the last three decades. In 1990, M2 stood at around 500 trillion yen. By November 2025, it reached a record 1,277 trillion yen, more than doubling in size.

Annual growth rates have varied, averaging low single digits in recent years (e.g., 1.6% YoY in October 2025), but spikes during crises like 2008 and 2020 saw surges up to 10-15%.

This expansion has kept zombie companies afloat—firms unable to cover interest payments from profits now make up one in five listed Japanese companies, hogging 30% of bank lending and employing nearly 10 million workers in unproductive roles.

The consequences are dire.

As St Onge points out, productivity has fallen 25% since 1990, while U.S. productivity rose 50% in the same period. Real wages in Japan are lower today than in 1990, and interest payments on debt already consume over a third of tax revenue. A few more percentage points in rates could push that to two-thirds, leaving little for essential services.

Japan’s Grip on U.S. Debt: A $3 Trillion Ticking Time Bomb?

Japan’s financial entanglements extend far beyond its borders, particularly to the United States. As the largest foreign holder of U.S. Treasury securities, Japan held $1.189 trillion in September 2025, up from $1.180 trillion the previous month and the highest since August 2022.

This represents a significant portion of the $8.7 trillion in foreign-held U.S. Treasuries.

But St Onge’s warning goes further: Including holdings by Japanese pensions, banks, and other institutions, total U.S. assets owned by Japan exceed $3 trillion. These include not just Treasuries but equities and other securities. In a crisis, Japan might be forced to liquidate these to shore up its own finances—repatriating yen to pay down debt or stabilize its economy.

The Shockwave: How Bad Could It Hurt the U.S.?

If Japan’s debt crisis erupts, the impact on the U.S. could be profound, echoing the interconnectedness exposed during past global shocks like 2008. St Onge predicts a fire sale of $3 trillion in U.S. assets, which could tank stock and bond markets while unwinding the yen carry trade—a strategy where investors borrow cheap yen to invest in higher-yielding assets like U.S. Treasuries and stocks. This trade has fueled global bubbles since COVID, and its collapse could drain liquidity worldwide.

Analysts warn of several ripple effects:Higher U.S. Borrowing Costs: Reduced Japanese demand for Treasuries could push up yields, complicating the U.S. government’s efforts to manage its own $35 trillion debt. Rising yields might add pressure on mortgage rates, consumer loans, and corporate borrowing, slowing economic growth.

Global Market Turmoil: Surging Japanese bond yields (recently hitting 40-year highs) could spill over, fostering pessimism in global bond markets and reducing capital flows into U.S. assets. While modest in isolation, this could exacerbate volatility amid U.S. fiscal concerns.

Broader Economic Fallout: A Japanese recession—potentially the worst since World War II if spending cuts are forced—would hit U.S. exports, supply chains (e.g., semiconductors, autos), and multinational firms. Combined with China’s slowing growth, it could tip the global economy into downturn.

The severity depends on the trigger: a bond market revolt, yen collapse, or political impasse. St Onge argues the only fix is drastic spending cuts, but that’s politically toxic. Instead, Japan may continue “sleepwalking” with more stimulus, delaying but amplifying the inevitable crash.

For the U.S., this serves as a cautionary tale. With its own debt-to-GDP at 125% and rising, America risks a similar path unless fiscal discipline prevails. As global debt hits “insane highs,” Japan’s endgame could be the first domino, reminding us that no economy is an island. Investors and policymakers should heed St Onge’s alert: Prepare for turbulence ahead.

Sources: worldpopulationreview.com, @@profstonge, m.economictimes.com, seekingalpha.com, ticdata.treasury.gov, ceicdata.com,

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