Also, rising Japanese bond yields will eventually attract investment inflows back to Japan. That will reverse the collapse in the yen which is now heavily shorted, and will thereby reverse the carry trades. Already, Pimco is saying that the rise in Japanese bond yields is causing outflows from U.S. treasuries.
That said, anyone running away from U.S. Treasuries at this juncture is likely to get whiplash, as higher yields in treasuries provide competition for now relatively lower yielding stocks. So all of these markets are now heavily interconnected thanks to Central Bank alchemy. Meanwhile, the falling yen has also been the key driver of the last several months' global stock market rally, so a reversal in the yen would be a major "risk off" catalyst affecting all risk assets. Given that we now live in a binary world of "risk on" - all assets rise and "risk off" - all risk assets fall, we can duly expect that a major yen rally will produce a long-delayed risk asset liquidation.
Time will tell of course who is right: "perma-bears" like myself, who drone on about the same risks every day, or those in the majority, who ignore the same risks every day. The event I am predicting will be of sufficient magnitude to make early precaution seem prudent, albeit not prescient.
The VIX (index options volatility gauge) is the ultimate barometer of complacency. I've shown this chart many times before, and yet here again we see the jaws of reality opening wider and wider...this inevitable convergence between reality and fantasy will be one for the ages: