Truss Shock
Definition
The Truss Shock refers to the financial market crisis in the UK in September 2022, triggered by Prime Minister Liz Truss's government announcing unfunded large-scale fiscal spending plans. The announcement caused a collapse in UK government bond prices, stock market declines, and a sharp depreciation of the British pound. The crisis forced the government to reverse its policies, and Truss resigned after just 45 days in office—the shortest tenure of any UK prime minister. The term is now used to describe similar situations where unfunded fiscal expansion leads to a "triple decline" of bonds, stocks, and currency.
Example
Japan's situation in 2025 shows similarities to the Truss Shock, with large-scale fiscal spending leading to rising bond yields, stock market declines, and yen depreciation. If bond prices, stocks, and currency all fall simultaneously, the momentum can accelerate rapidly and become extremely difficult to stop.