Rising yields threaten Japan’s financial system. If Japan loses control, the ripple effects will be felt everywhere.

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The 10-year Japanese Government Bond (JGB) yield has hit a 16-year high, creeping toward 1.75%. That may not sound extreme by global standards, but in Japan’s fragile system, even small increases in borrowing costs send shockwaves through the economy. The Bank of Japan has spent years suppressing rates with aggressive bond-buying. Now, markets are testing its resolve.