The Yen, the Vigilantes, and the Return of History

Ghosts of Abenomics and the Price of Defiance

For decades, Japan has been the great exception of global macroeconomics — a country seemingly immune to the rules that bind everyone else. Endless debt, near-zero rates, a compliant bond market, and a currency that absorbed the strain without protest. Investors learned to treat Japan as a closed system, a place where history had been suspended.

That assumption is now being tested.

In recent weeks, Japan has found itself at the centre of a tension that feels uncomfortably familiar: rising yields, a weakening currency, political promises of fiscal expansion, and markets pushing back. The yen has become volatile, government bond yields have surged to levels not seen in decades, and the phrase “bond vigilantes” — long thought obsolete — has quietly returned to the conversation.

At the heart of this shift lies a clash not just of policies, but of philosophies. A newly empowered political leadership is embracing imagination, stimulus, and popular mandate. The central bank, meanwhile, is caught between credibility and compliance, inflation and debt sustainability. Markets are watching closely — and remembering.

This post is a natural follow-up to the All Gates, All Barbarians series, which explores why Japan’s current moment is not an anomaly, but a recurrence. Why history, when ignored, does not fade — it reasserts itself. And why currencies, bond markets, and capital flows are often the first to signal when imagination has begun to outrun reality.

Behind the paywall, we examine the mechanics of this repricing, the political calculus driving it, and the uncomfortable parallels with past episodes where markets eventually forced the issue. The yen, the bond market, and the global system are entering a phase where patience may soon give way to consequence.

History has returned. And this time, it is sending the bill.

Let’s explore.