Peter Schiff: Japan bond strain could prick U.S. bubble

Speaking on his podcast this week, economist Peter Schiff warned that stress in Japan’s bond market and a four-decade low for the yen could lead to large-scale selling of Japan’s holdings of U.S. Treasuries and have ripple effects in U.S. financial markets.

Schiff highlighted recent moves in Japanese yields and the currency. Japan’s 30-year government bond yield approached 4%, a record for that maturity, and the 10-year yield reached levels not seen since 1996. The yen weakened to its lowest level versus the dollar in 40 years. Japan’s public debt exceeds 200% of gross domestic product while its benchmark policy rate remains near 1%, leaving limited room for the central bank to respond to rising yields.

Japan is the largest foreign holder of U.S. Treasuries, with more than $1.1 trillion on its balance sheet. Schiff warned that a crisis in Japanese debt markets could force selling of that stock of Treasuries and that such selling would push up U.S. Treasury yields.

U.S. Treasury yields have already risen. The 30-year Treasury closed the week near 5.16%, the highest level since 2006. At the same time, the federal debt has topped roughly $39.6 trillion.

Schiff also cited recent losses in major technology companies that have invested heavily in artificial intelligence capacity. Alphabet shares fell about 10% after announcing higher-than-expected capital spending. Oracle has dropped roughly 41% year-to-date. Meta fell 7.3%, Amazon lost 6.8%, and Microsoft slipped 2.7%, leaving Microsoft’s year-to-date decline near 19%.

He pointed to declines in other high-profile companies as further evidence of investor caution. Shares of SpaceX fell about 7.7% during the week and trade roughly 49% below their post-IPO high; the company’s public float is scheduled to expand from 5% to 40% by year-end. Tesla shares fell about 18% over the same stretch and are roughly 35% below their 52-week high. Schiff estimated the combined declines reduced Elon Musk’s net worth by nearly $100 billion in a single week.

Schiff compared annual AI capital spending, which he put at roughly three-quarters of a trillion dollars, to the buildout before the dot-com crash. He said he does not dispute AI’s long-term potential but warned markets may be overestimating near-term returns on large hyperscaler investments.

Commodity prices and inflation risks were also discussed. Oil rose above $100 a barrel and gained about 30% in July, a move Schiff linked to tensions related to Iran. He predicted the oil increase would push the July Consumer Price Index higher. Gold rose about 1% for the week, while mining-focused ETFs outperformed, with the GDX up about 5.6% and the GDXJ up about 5.8%.

On labor-market data, Schiff questioned the relevance of a fall in weekly jobless claims to 187,000, citing the growth of gig work and softer hiring trends compared with past decades. He criticized newly imposed tariffs applied under a forced-labor provision of the Trade Act of 1974, calling the policy an unconstitutional tax that would ultimately fall on American consumers.

Background: Japan’s low-rate policy and a long-standing high level of public debt have coincided with yen depreciation and rising global yields, putting pressure on long-duration government bonds. Schiff’s remarks linked those developments to potential changes in holdings of U.S. Treasuries and to recent volatility in U.S. equity and commodity markets.