On the cusp of change - Govt bond yield in France and Japan

Have a look at Pic 1 (France) and Pic 2 (Japan).

Yields in France and Japan are breaking out.

Investors are waking up and demand higher yields for the risks they take on.

Take France for example... Budget deficit over 5%. Debt to GDP is around 120%.

No serious attempt to rein in the spending. Investors are rightfully to be concerned.

So what is next ?

Given it is part of EU, France will likely be required to tighten its belt. Given the political situation, it will likely look to muddle through.

As a result, growth in the euro zone will likely disappoint. ECB will have no choice but to keep the rates lower than otherwise. Folks will also increasingly question the stability of the currency and the constant conflict between the ECB and individual country. Will Euro follow the path of the Yen ? I can see a world where the 3 major developed world currencies are becoming less trusted.

The world is changing. Inflection point for EM ? Hard assets ?