Global markets shifted abruptly into a defensive posture this week, with US equities dropping over 2% amid a dual shock of fiscal instability in Japan and renewed trade war tensions between the US and Europe, according to a market commentary published by QCP on Wednesday.
Bitcoin falls under pressure
Bitcoin has fallen below $90,000, failing to hold its recent reclamation of the $97,000 level as the cryptocurrency struggles to find footing.
The asset is currently trading as a high-beta risk asset rather than a hedge, showing high sensitivity to rising rates and geopolitical instability, QCP noted.
Risk assets have retreated sharply as investors move toward capital preservation, marking a distinct change in sentiment from recent weeks.
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Japan’s fiscal concerns ignite bond volatility
Japan’s debt market looms in the backdrop of Bitcoin’s ailing price, QCP noted.
A historic shift in Japanese debt markets has emerged as a primary catalyst for the broader volatility, with 10-year Japanese Government Bond yields hitting approximately 2.29%.
This level has not been seen since 1999 and marks a sharp departure from the decades of near-zero interest rate policy that previously anchored global bond markets.
Concerns over the sustainability of public finances in Japan have intensified as the debt-to-GDP ratio exceeds 240% with total debt standing at approximately ¥1,342 trillion.
Projections indicate that debt servicing costs will consume roughly 25% of fiscal spending by 2026, raising questions about the stability of the world’s third-largest economy.
US and EU trade tensions escalate
Geopolitical friction has further pressured markets after President Trump imposed tariffs on eight European countries following their opposition to US control of Greenland.
The new trade barriers include an initial 10% tariff effective February 1, 2026, which is scheduled to rise to 25% by June 1, 2026.
Bilateral trade volume between the two regions is estimated at $650 billion to $700 billion, creating significant economic stakes for both Atlantic partners.
Europe has signaled immediate retaliation, and the European Parliament is considering suspending the US-EU trade deal agreed upon in July.
Such a move threatens a breakdown in transatlantic relations and has left investors debating whether the tariffs represent a structural policy shift or a negotiating tactic.
