Re-Gerrymandering Effort Dealt Blow & Japan Bond Crash Could Hurt
Rolling Stones, Dave Matthews Band Live, and the Vapors
Virginia’s return to the gerrymandering ring, albeit temporary, took a right to the jaw yesterday from Tazewell Circuit Court Judge Jack Hurley Jr.
But the news below from Japan’s bond market is more important. #Affordability
Anyway…
Round 1 to the Republican plaintiffs.
Round 2? TBD
American democracy is continuing, n’est pas? (h/t Lafayette)
For all the doomsayers about American democracy, we seem to be rowing merrily along from one election and court ruling to another.
Seems like every day there is either an election result (special, nomination, or general) or an important judicial decision.
Good.
Since the 2024 elections, Democrats have won every non federal statewide election (13 thus far), lead on the Congressional generic ballot, should win the U.S. House next year, and very well could take back the U.S. Senate.
While Virginia is currently a 6-5 Ds to Rs mix in its House delegation, Governor Spanberger won the Commonwealth’s House districts 8-3.
If both of the failing, corrupt parties REALLY want to start improving the States United, perhaps they should start on rebuilding TRUST.
To begin - trust the people. We’re sovereign.
Trust the process. It’s a good one.
In fact, celebrate both of those.
Why rebuild trust? Well, it’s obviously lacking (check any poll); however, we got issues coming. Real, big decisions.
Without trust, the can will get kicked and the pain will only grow.
God as my witness, I never thought I would be writing about the Japanese Bond market, but their can kicking is about to stop.
And hurt.
The article linked below was sent to me from a business leader and long time friend who deals in financial and employment numbers that begin well left of the decimal.
LOTS of commas.
We see things economically along the same lines. Politics? Pretty close.
OH! Is it GOOD news? No.
Trust me when I say this - we need to pay attention to this one.
The lesson, once again, having been learned after failed test?
The longer you put off making hard financial decisions, the more painful they will become.
Japan kicked the can down the road -for decades - and it could up end a lot of American state and local government budgets exposing bad policy decisions.
Why? Japan holds over $1,100,000,000,000 in US debt or about 12-13%.
Lots of commas.
Got your attention?
3…2…1…
Bloomberg headline:
T. Rowe Price’s Arif Husain describes Japan’s rising rates as a financial San Andreas fault-line, with each tremor leading to feverish speculation over when the big one will come.
By the end of the day, US Treasury Secretary Scott Bessent had called his Japanese counterpart, Finance Minister Satsuki Katayama, to tell her that the selloff had been felt in American markets.
An analysis from Goldman Sachs Group Inc. suggests every 10 basis points of “idiosyncratic JGB shock” puts around two to three basis points of upward pressure on yields in the US, and elsewhere.
From the world of Lots of Commas Crunching Budget Negotiators looking at new, expensive, and long term liability creating policies: (#PaidFamilyMedicalLeave):
Why worry? Each of us is carrying an unlicensed nuclear accelerator on his back. - Dr. Peter Venkman
Japan’s Bond Market Trap and the Risks for Virginia’s Fiscal Outlook
Japan’s bond market is undergoing a structural reckoning decades in the making.
Following the collapse of Japan’s late-1980s asset bubble, policymakers avoided large-scale restructuring and deflation, instead relying on prolonged monetary easing and deficit financing.
Over time, this left the Bank of Japan (BOJ) as the dominant buyer of Japanese government bonds, effectively monetizing fiscal deficits.
Today, the BOJ owns more than half of outstanding Japanese government debt, reflecting a shortage of natural private buyers and a market heavily dependent on central bank support.
As inflation pressures and global normalization force the BOJ to step back—even cautiously—the system faces strain.
Reduced central bank intervention allows yields to rise, revealing the depth of Japan’s fiscal imbalance and prompting domestic investors to reassess risk.
This shift has global consequences. Japanese investors have long been major buyers of U.S. Treasuries, helping suppress American interest rates.
As yields rise at home and currency risk increases, demand for U.S. debt weakens unless U.S. rates move higher.
For the United States, this dynamic places upward pressure on Treasury yields, which then flows directly into higher mortgage rates, corporate borrowing costs, and municipal bond yields.
States feel this quickly.
For Virginia, higher borrowing costs mean more expensive infrastructure projects, reduced fiscal flexibility, and tighter margins in capital planning.
Pension funding assumptions also become harder to manage in a volatile, higher-rate environment.
These global shifts intersect with Virginia’s competitiveness.
CNBC’s Top States for Business rankings heavily weight cost of doing business, workforce flexibility, and economic growth.
In a higher-rate world, new permanent cost commitments—such as SB2’s Paid Family and Medical Leave program—carry greater risk.
Entitlements adopted during periods of tightening global liquidity are harder to sustain if growth slows or revenues disappoint.
The lesson is one of timing and discipline.
Japan’s experience illustrates how long-deferred adjustments eventually surface under less forgiving financial conditions.
For Virginia, the 2026–2028 window is critical: preserving fiscal flexibility and cost competitiveness will be essential to maintaining budget stability and a top-tier national business ranking as global interest rates reset.
Now, off ya pop…
Ladies and Gentlemen!
THE ROLLING STONES !
All Along the Watchtower seems to pop here:
Dave Matthews has a great live version
Turning Japanese - the Vapors
(Lyrics are about heartbreak and becoming someone different post breakup.)
The Japan bond analogy as a "financial San Andreas fault-line" really captures the systemic risk here. The compounding effect where 10 bps JGB shock translates to 2-3 bps pressure on US yields shows how interconnected global debt markets have become. I've watched state budgets get squeezed by far smaller rate shifts, so this trajectory is concerining for fiscal planning.