US Debt Tops 100% of GDP as Weak Japanese Yen Raises Treasury Market Risks

• US debt held by the public has climbed above 100% of GDP for the first time since World War II
• Investors are also watching the Japanese yen, which has fallen to a nearly 40-year low against the US dollar
• With the yen trading near multi-decade lows, investors are watching for signs of action from Japanese policymakers

The US debt story is back in focus. As the US debt-to-GDP ratio climbs above 100% for the first time since World War II, another development seems to be unfolding. At the same time, the Japanese yen is hovering near levels that have previously triggered government intervention. On their own, each development is significant. Together, they are giving investors another reason to keep a close eye on the markets.

Also Read: Samsung, SK Hynix & Micron Hit With DRAM Lawsuit Amid South Korea’s AI Expansion

US Government Debt Reaches a Milestone Not Seen in Decades

According to the US Treasury and the Congressional Budget Office (CBO), publicly held federal debt now exceeds the size of the US economy. The milestone marks the first time the US debt-to-GDP ratio has crossed 100% since the aftermath of World War II. This points out how years of deficit spending and higher borrowing costs have reshaped the country’s fiscal outlook.

The CBO expects the ratio to continue rising, projecting it could reach roughly 120% by 2036 if current policies remain unchanged. The agency has warned that a growing debt burden will increase interest payments, limit the government’s ability to respond to future economic shocks, and place added pressure on federal finances.

The development also comes as Treasury issuance remains elevated to finance government spending. This keeps bond investors focused on demand for US debt and the direction of long-term yields.

Also Read: Palantir and Nvidia Expand Sovereign AI Partnership for US Government

Why the Japanese yen matters now

While the debt milestone has drawn headlines, currency markets are watching another potential catalyst. The Japanese yen has weakened beyond ¥161 against the US dollar, bringing it close to levels that prompted Bank of Japan intervention in recent years.

Japan is one of the largest foreign holders of US Treasuries. When authorities step in to support the yen, they typically sell dollars and may tap foreign reserves that include Treasury securities. Larger-scale selling could put upward pressure on US Treasury yields. This adds another stressor for equities and other risk assets.

The US debt or Japan’s yen developments have not disrupted markets yet. But with the US borrowing heavily and the yen trading near intervention territory, both are likely to stay on investors’ radar in the weeks ahead.

Also Read: Grayscale’s Head of Research Says Strategy Should Sell $3B Bitcoin as BTC Holds Below $60K