How Japan’s Broken Bond Market Is Threatening Your Wealth—What You Must Know

Welcome back to Impact Theory with Tom Bilyeu! In this eye-opening episode, Tom Bilyeu and co-host Drew dive deep into one of the most dramatic shocks to the US stock market in recent history: how shifts in Japan’s bond market triggered a breathtaking $1.3 trillion loss in value, rippling across the globe. They break down the complex world of Japanese debt, explain the notorious "yen carry trade," and explore why rising interest rates forced investors to panic sell, collapsing asset prices everywhere. Using relatable analogies—from pizza shop owners to kids borrowing money from mom and dad—Tom Bilyeu makes sense of why these macroeconomic tremors affect real people and their everyday finances. Not only do the hosts tackle the domino effect in crypto markets and stocks like Nvidia, but they dig into psychological factors driving market panics, how margin trading can lead to instant losses, and why diversification is a smart strategy in uncertain times. Whether you’re navigating your first investment or wondering if you should stuff your cash under the mattress, this episode arms you with the mental frameworks and practical insights to protect your financial future in a world where monetary order feels increasingly fragile. Tune in to get clear, actionable advice and a global perspective on what’s really happening—and what you can do next. What's up, everybody? It's Tom Bilyeu here: If you want my help... STARTING a business:join me here at ZERO TO FOUNDER https://tombilyeu.com/zero-to-founder?utm_campaign=Podcast%20Offer&utm_source=podca[%E2%80%A6]d%20end%20of%20show&utm_content=podcast%20ad%20end%20of%20show: https://tombilyeu.com/zero-to-founder?utm_campaign=Podcast%20Offer&utm_source=podca[%E2%80%A6]d%20end%20of%20show&utm_content=podcast%20ad%20end%20of%20show https://tombilyeu.com/zero-to-founder?utm_campaign=Podcast%20Offer&utm_source=podca[%E2%80%A6]d%20end%20of%20show&utm_content=podcast%20ad%20end%20of%20show SCALING a business:see if you qualify here. https://tombilyeu.com/call: https://tombilyeu.com/call Get my battle-tested strategies and insights delivered weekly to your inbox:sign up here. https://tombilyeu.com/: https://tombilyeu.com/ ********************************************************************** If you're serious about leveling up your life, I urge you to check out my new podcast,Tom Bilyeu’s Mindset Playbook https://open.spotify.com/show/47VE90Cittmo6TGGFqg2xf —a goldmine of my most impactful episodes on mindset, business, and health. Trust me, your future self will thank you. ********************************************************************** FOLLOW TOM: Instagram:https://www.instagram.com/tombilyeu/ Tik Tok:https://www.tiktok.com/@tombilyeu?lang=en Twitter:https://twitter.com/tombilyeu YouTube:https://www.youtube.com/@TomBilyeu Learn more about your ad choices. Visit megaphone.fm/adchoices https://megaphone.fm/adchoices See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Tom Bilyeu?

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• 0:45Tom Bilyeu?

  Their dashboard tracks what comes next based on what your business actually needs. So EIN number, registered agent, licenses and permits, bookkeeping, business banking. I tell every founder the same thing. Just make it official. Click the link in the show notes to check out Taylor Brands and get started on your business today. This is a paid advertisement. Ray Dalio is calling it. The monetary order is breaking down, and we're now on the brink of war, both internal and external. This is due to economic forces the world over that repeat throughout history. It includes a decline in confidence in paper currencies and debt as a category,

• 1:30Tom Bilyeu?

  and they no longer view it as a good store of wealth.

• 1:33Speaker 01

  The first chip kind of fell yesterday when the stock market lost over $1.3 trillion in value.

• 1:38Tom Bilyeu?

  Some people are claiming that this is about Trump and Greenland. It is not. That comes later. That is a problem. It's a big problem, and it's going to rear its ugly head. And it is going to be, I'm sure, similarly catastrophic. This just isn't the effect of that. This is about long-term economic forces that are finally spilling over in Japan. The Japanese yen carry trade, which we have talked about before, has been fueling the global economy for decades. I was saying debt fuels this stuff. Well, you've got to have somewhere that's giving you debt at great rates, and that somewhere has been Japan. And as rates climb, it's forcing people to sell off other assets

• 2:21Tom Bilyeu?

  that they bought on previously cheap Japanese debt. Japan's approximately $7.6 trillion government bond market experienced sharp yield rises with long-dated yields hitting multi-decade highs. Now, this can be counterintuitive.

• 2:41Tom Bilyeu?

  As the bond yields go up, the price is coming down. And as the bond price goes up, the yields are coming down. What happens is if people know that, oh, you can really trust this, you're going to get paid back over time, then the yield of that is going to be low. They don't have to incentivize anybody to pick up that debt because it's like, hey, this is a super, super safe place. As people become concerned that the debt is mispriced or that there's instability, then the price is going to go up because they have to find, or the yields are going to go up because they have to find a way to get people to come in and buy this. But to make the yield high, the price has to be low.

• 3:26Tom Bilyeu?

  So what you're seeing is the, um,

• 3:30Tom Bilyeu?

  the prices of Japanese bonds are dropping like crazy so that the yield can go up to entice people to come in. So basically, people are panic selling their bonds and they're getting out of the Japanese debt game. Now, part of how I know this is true is because of the price action in Bitcoin. The important thing to understand is Bitcoin trades 24/7/365 without delay. So you can see far more accurately what it's based on because the US stock market was shut for the holiday weekend. And the Bitcoin price dropped right around the sell-off of the Japanese yen.

• 4:12Tom Bilyeu?

  So Bitcoin fell below key psychological levels of the 89,000-ish range during the sell-off. Now, if this had been a Greenland problem, you would have seen Bitcoin and the markets react to the news on Greenland. But they didn't. They end up reacting to the news on Japan. Now, the extended crypto market drawdown wiped out about 150 billion in valuation with Bitcoin leading the decline. So keep that in mind. Bitcoin's drop didn't drop with the news about Greenland. It was just perfectly synchronous with the news coming out of Japan. So again, this is not me saying that Trump's attitude posture towards Greenland, towards Europe, isn't going to have

• 4:56Tom Bilyeu?

  problems. It is. This just isn't that one.

• 4:59Speaker 01

  For the dude who's making pizzas in the back of the pizza shop and has 10K in the bank, he heard all of that and he was like, hey,

• 5:06Tom Bilyeu?

  Damn, first of all, if the homeboy making pizzas has 10K in the account, this is my man.

• 5:13Speaker 01

  If he owns a pizza shop, I feel like he needs a little bit more operating confidence.

• 5:17Tom Bilyeu?

  I didn't hear the word own. I saw him in the back like clocking $7 an hour.

• 5:21Speaker 01

  So when he hears all this, he was like, yeah, this is cool, Tom, but like, I need to worry about these pepperonis. What does this actually mean practically? Like, if you can sum it up in two, three sentences, I appreciate the expense and thank you for the econ bros are like, yes, we got it. We'll go do it. But for, you know, the pizza flippers, what's give it to us kind of in a, in the Lego, explain it to me like I'm five way.

• 5:41Tom Bilyeu?

  If you can borrow money from mom and dad, you can go buy pizza toys, whatever you want. So a lot of people are going to come in and buy that pepperoni pizza from you. When the kids can't borrow money from mom and dad anymore, and now they gotta work like a whole lot of chores for a lot less pay, all of a sudden, they're not splashing out on pizza. It's, it's only Nintendo and Fortnite and pizza gotta go. So now, everybody's gonna feel that pinch of there's just less dollars. People feel, not only do, not only are people less rich, meaning they

• 6:23Tom Bilyeu?

  have less access to money, even if it's debt, but they feel less rich. And so now they start acting in a way where it's like, ah, I don't want to spend this money.

• 6:34Speaker 01

  All right, I'm a grounded again. So a couple, there was a couple of workers in the chat that was like, Drew, that's me. So thank you for asking. I was like, all right. So we grounded that, when there's not enough, a lot of free money splashing around, people withdraw. So that's why the stock market pulled in.

• 6:45Tom Bilyeu?

  Well, people actually, so the nature of the debt changes.

• 6:50Tom Bilyeu?

  People realize, oh, I've got to pay back my Japanese debt now because I can't make the delta anymore. So now I'm at risk. So I've got to sell, but I've got to sell now. Whenever you have to sell now, odds are you're going to sell at a discount. When you start selling at a discount, it sends like economic pheromones into the world and people realize, oh, people are selling at a discount, something bad is happening. I'm going to sell now so I can get the hell out. And you see these huge dips because people are thinking short term. People start panic selling and because most of the people in the market are trading on

• 7:30Tom Bilyeu?

  margin, so debt, 1.2 trillion dollars of margin exists in the system. That debt has requirements that, hey, in your Robin Hood account or wherever you're doing it, you have to have at least this much in collateral. If you don't, don't worry, Drew, I'm just going to auto sell the things in your account to make sure that I, Robin Hood, am fine. It's called being liquidated. And so if the numbers get off in your account, you could lose everything, literally instantaneously, at the speed that AI can detect,

• 8:10Tom Bilyeu?

  do the transfer, and now poof, it's all gone. So, and by the way, if that trade doesn't happen fast enough, you can find yourself upside down because it can go into the negative where we weren't able to sell your assets, but you still owe us the money.

• 8:25Speaker 01

  Now you owe me. Now, on the US side, we're seeing the US Treasury bond markets to start to rise. And some people are saying those two things are tied. Scott Beston talked about it yesterday.

• 8:34Tom Bilyeu?

  You're going to see how interconnected the global financial markets are. And so people will borrow Japanese yen and invest in Nvidia as one very real, very concrete example. Because Nvidia is like just returning like crazy. People think this is going to last forever. So they take that money out and they put it into Nvidia.

• 8:56Speaker 01

  Borrowing from Japan costs me 2%. Nvidia gives me 30% returns. I pay the 2% off, I walk away with that delta.

• 9:02Tom Bilyeu?

  Correct. And so when I become upside down because either the rate of the yen that I have to pay back is now higher than the delta that I'm making, or I look at the market and I see, oh, the thing that I was counting on giving me a yield is actually negative. So now I'm going to owe that debt and I'm trapped in the market. So the question is, do I panic sell and take a big loss on what I bought it for, but I can still pay back my debt? Or do I hope that, uh, fingers crossed that we don't stay in this position? And I've got plenty of time to go back and pay that off later. And so people start selling because they think, well, I've already made a bunch of money.

• 9:45Tom Bilyeu?

  So I don't need to make more, but I cannot have the exposure of the debt in Japan because I don't know where this is going to stop. And if this is Japan essentially collapsing economically, well, this may go like that for five to 10 years. And so it's not like I have any safety guarantees whatsoever. So I'm underwater on Nvidia, but I'm still ahead of my debt. So let me liquidate, lost a bit, but I'm not going to be negative in my account. I'll pay off my debt. I'm good. But that then causes a cascade in the value of Nvidia. And because people do not understand that the stock market is a casino, they don't realize that this is all just paper value. It it's worth whatever somebody says it's worth, not a dollar more, not a dollar less.

• 10:31Tom Bilyeu?

  And so when people panic for that period of time, it's really worth less. And so people can get trapped, they get emotional because they don't know, is this going to be down forever? Or is this going to be down for 24 hours? So they panic sell and then that drives the cost, the price down even more. It starts liquidating more people because the value of their stock, which is on AI's light speed level is like, well, you dip below the liquidation point for a millisecond. Tough. It triggers a cascade of events where you get wiped out. And so that's how the red just tumbles and it keeps getting worse and worse and worse and worse and worse until basically everybody's liquidated and then it stabilizes again. But then that's a lot of people that just got, in some cases, lost their entire net worth.

• 11:14Speaker 01

  Yeah. So out of that 1.5 trillion, these are actual portfolio accounts and things that are kind of impacting.

• 11:19Tom Bilyeu?

  Like this is why I'm, as I tried to wrap my head around the stock market. It always pissed people off, but I would say, wait, this is like trading baseball cards. That was my first understanding of it in my twenties and everyone laughed at me. Ah, ha, ha, ha. And now, the more I learn about it, it's like that curve. It's like idiot says this is like baseball cards. Guy in the middle is like, you don't understand how sophisticated this is. And then the guy that actually understands it's like, this is like trading baseball cards. Yeah, I've gone on that journey. This is like trading baseball cards. This is a casino. They are only worth what people say they're worth. Even something that pays dividends can trade below what you would make just collecting the money off the dividends. Doesn't matter. It, it only trades at the price that people are willing to pay.

• 12:04Tom Bilyeu?

  That means this is a psychological game. That means you are gambling on what the emotional state of people is going to be. Period. End of story. Anyone that says any different than that is fucking lying to you. Now, or they just don't understand it, which I will never get.

• 12:20Speaker 01

  They're lying to themselves based off the story that everybody, somebody else told them.

• 12:23Tom Bilyeu?

  Correct. Now, the stock market has huge advantages. It's good. It's amazing. Debt has huge advantages.

• 12:28Speaker 01

  That's, that's what, that's what I'm going next.

• 12:30Tom Bilyeu?

  Yeah. But, oh my God, this stuff becomes a problem.

• 12:33Speaker 01

  The Japanese bond market breaks. US stocks are going to take a tumble. Are, is the S and P 500 dead? Should we go to gold? I have six months of cash in my bank account. Should I leave that in there? Should I move it?

• 12:45Tom Bilyeu?

  I will walk people through the way to think about it, the mental framework. I'll tell you what I'm doing. I do not advise people to attach their boat to my way of thinking. They need to formulate their own way of thinking. That way, we don't both get wiped out. Should I be making poor decisions? But it goes like this. So what do we do in a time where countries don't trust each other? So the world order is unstable. I don't know who's going to be friends today and who's going to be friends tomorrow. I don't know if people are going to war. I don't know what that's going to do. I don't trust people to pay back their debt. So you start setting the table like that and you go, okay, well, in times of massive uncertainty, what are the usual plays? One,

• 13:30Tom Bilyeu?

  Recognize with massive humility that you cannot predict the future well. So you want to have a diversified portfolio that diversifies across economic forces. So what are the economic forces? You've got things like high risk. So when you've got high risk, you've got a lot of volatility. That's going to be the area that pulls back first. That's why you see these lightning crashes in the price of the stock market in a way that you're probably not going to see in something like gold. Gold typically isn't going to go up super fast. It's not going to go down super fast, not by huge swings. Because what gold has shown over time is in times of uncertainty, people go there not because they expect a massive return. They go there to protect themselves against inflation.

• 14:13Tom Bilyeu?

  And so they're just moving to that saying, uh, this is where you park your money. When you're like, I don't know what the fuck's going to happen. So it is as close to I'm going to bury my money in the backyard as you're going to get. But I want to bury my money in the backyard in a way that it can't be inflated away. So cool. Gold has been that forever. Bitcoin is trying to be that. Bitcoin trades more like a tech stock right now, but I think that it's got long-term legs, but that's a me thing. So people need to be thoughtful. They need to formulate their own opinion about what they think about how the human mind is going to react to Bitcoin. I have a thing that says the world is only getting more technical. When you start thinking about wanting AI to be able to do whatever the hell you want it to do, you're going to give it digital money. You don't want that digital money to be owned by the government.

• 14:58Tom Bilyeu?

  I think everybody sees now, people alive today will see how rapidly a government can become unstable. And so I think they're going to go, yeah, don't want anything controlled by the government. Government has a history of seizing gold. When protesters started getting shot in Iran, the price of Bitcoin went skyrocketing there because they just started gobbling up as much as they could. And so it's like, and sorry, prices aren't local. They started buying rapidly there.

• 15:25Speaker 01

  It was, it outdid the local currency.

• 15:28Tom Bilyeu?

  Right.

• 15:28Speaker 01

  Yeah.

• 15:29Tom Bilyeu?

  So they.

• 15:33Tom Bilyeu?

  I think people will look at that and go, hmm, this is decentralized. I like that. Uh, it's far easier to move than physical gold. That's my beef with physical gold. Um, also, I feel like I can quote unquote, see it. Whereas gold, I'm just taking somebody's word. No, no, no, you really do own physical gold, Tom. It's all good. So I'm like, huh. So anyway, you start doing that. So, um, my portfolio looks like I still own quite a bit of debt, but it's all extraordinarily short term. It's all US debt primarily, though I do have some corporate, but I've been slowly backing out of that for the last year. Um, the reason there is that I know that they'll at least print money to cover that.

• 16:15Tom Bilyeu?

  And so at least US government debt is saying every holder of dollars will suffer as Tom suffers. So I'm like, okay, like there's some balancing thing there. Uh, but I am going to be migrating more and more out of that into things like, uh, gold, gold mining stocks, silver, silver mining stocks. Bitcoin, I'm already massively deployed. ETH, I'm already massively deployed, but I might start picking up some more there. Um, international, uh, exchanges so that I'm, I'm still in, um, risk on markets. Cause I think that's important because you don't want to miss out on something that goes up. Because again, I don't think I can see the future clearly.

• 16:57Tom Bilyeu?

  Uh, I'll stay in the US, just not overly indexed on the US. Um, and just try as much as possible to spread my risk around with a profile that looks like somebody who is paranoid that the world order is no longer stable.

• 17:11Speaker 01

  Do you do any money markets, like savings, that type of thing? Or do you just keep cash as cash?

• 17:16Tom Bilyeu?

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• 18:01Tom Bilyeu?

  You authorize them once, then they handle everything. They keep removing your data as it reappears. Just go to incogni.com/impact and use code IMPACT for 60% off an annual plan. Try it risk-free for 30 days. Now, let's get back to the show. Well, no, no, no, it's all in short-term government debt. So treasuries, bonds. Individual. I'm sorry, by the way, just I saw one question in the chat. So they're like, okay, good for you, but what about us? That is for you guys. So this is where I am always emotionally traumatized. That people do not think that they have enough money to invest in the stock market.

• 18:45Tom Bilyeu?

  And you downgrade your life in whatever way you need to in order to start saving money. And listen, I understand if you've got kids and all that. The emotional pain of that may be worse than just dealing, rolling the dice on economic uncertainty. I totally get that. I've got nothing but empathy for it.

• 19:09Tom Bilyeu?

  But no matter what, you need to find a way to save money for your own emotional reasons. Everybody, hopefully, at this point, knows the story of the janitor who retired a millionaire because he just lived super frugally and socked away, you know, whatever, $25 out of every paycheck. I forget what it was, but it was a ridiculously small amount of money. But over the 40 years that he worked, that compounding interest became incredible. And so when you're playing a 40-year game, then you really can start to make money. Getting rich quick is not going to happen. So right now, the thing that I would most aggressively people to form a mental model around is, how do I protect myself from instability?

• 19:52Tom Bilyeu?

  And the things that protect from instability are the things that we've been talking about. They are going to be commodities, productive assets. And part of the reason that commodities like gold are so important is there's no counterparty risk, or at least you can limit it. So. That Bitcoin again. So don't buy silver now because it's hot. Don't buy silver now thinking that it's going to go up in price. Buy silver now because you have a mental model that goes something like sixty to seventy percent of the value of silver is determined by industrial use. It's used in high tech manufacturing. It's going to be important in robotics and AI. Therefore, it's likely to maintain its value.

• 20:36Tom Bilyeu?

  That this is not a thing that people can just one day go, now we don't care about silver anymore. So if I had money in silver, while the price may not go up and it may even go down. It's not going to go down if inflation, all hell breaks loose and inflation goes crazy. That's going to probably remain relatively stable. It will have drawbacks as all things do, but that's probably going to be relatively stable. When you think about inflation can get into the double digits. That's where that kind of thing gets scary. So I don't know what other words to say to people other than I get it. Like if you don't have a lot of money, I understand that you're going to be deploying small amounts of money to the things that I said. But part of what makes the stock market the magically delicious thing that it is, you can buy a fraction of a share.

• 21:21Tom Bilyeu?

  So get in, there's such things as penny stocks, not that I'm advising that. I'm just saying that for somebody to say they can't get into the market because they don't make a lot of money is nonsensical and is exactly how you get wiped out. Because you're not looking at, okay, well, how do I, how do I put a hundred dollars into gold? Whatever. But find ways to start socking away some money and protect yourself as much as possible from inflation.

• 21:48Speaker 01

  And Mark Cuban said it best, the most guaranteed return you can do is pay off debt. Because if you're paying twenty-three percent on a credit card, you get twenty-three percent returns if you just pay your credit card off. And that money could go into your pocket instead of to Capital One, American Express, wherever you send it to. So.

• 22:02Tom Bilyeu?

  Yes, and I agree, penny stocks should not have even come out of my mouth. I'm not telling people to buy penny stocks. Let's talk about a pattern that is guaranteed to be killing your progress. You know what you need to do. You need consistent nutrition. We all do. You need vitamins, probiotics, greens. We all know that we should be doing more of it. When your morning gets chaotic, you skip it. When you travel, you skip it. When your routine breaks, everything tends to break. And that inconsistency compounds against you every single day. AG1 is designed to solve the execution problem. One scoop, eight ounces of water, and you're done. You're getting 75 plus ingredients, vitamins and minerals, pre and probiotics,

• 22:43Tom Bilyeu?

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