The Japanese bond market, valued at 7.2 trillion dollars, collapsed due to a 2.8 billion dollar transaction, exposing a major vulnerability in the global financial system.

A mere $2.8 billion transaction caused Japan's $72 trillion government bond market to collapse. This was the total trading volume when Japan's benchmark ultra-long bonds plunged on Tuesday, leading to $41 billion in market value evaporation for bonds of various maturities and causing ripples in global markets. This sell-off pushed yields to record highs, exacerbating concerns about Japan facing a "Taper Tantrum" and prompting US Treasury Secretary Yellen to seek assurances from Japan about market stability, referring to it as a "six sigma" extreme volatility event. The significant disparity between market value evaporation and actual trading amounts highlights how Japan's sometimes illiquid bond market has become a weak link in the global financial system. After years of large-scale stimulus policies dampening volatility, this market, the third largest government debt market globally, is now increasingly vulnerable to shocks as the Bank of Japan and domestic life insurance companies withdraw.