Investing.com -- The biggest threat to the S&P 500 bull market is not a US recession, but Japan’s deeply negative real rates relative to the US, according to BCA Research strategists.In a Wednesday report, the investment research firm highlighted that Japan’s real policy interest rate differential versus the US has reached an unprecedented and unsustainable level of -5.4%.“Since 2022, Japan’s real policy interest rate differential versus the US has changed by a remarkable -12 percentage points,” BCA Research strategists noted.BCA stresses that Japan’s negative real rates have significantly contributed to the rampant inflation in US tech stock valuations, particularly in the AI sector.Tech valuations, which previously tracked US bond prices, decoupled in 2022 and instead began to move in near-perfect inverse correlation with the Japanese yen. This shift occurred just as Japanese real rates plummeted, both in absolute terms and relative to the US.“The post-2022 perfect correlation of tech stock valuations with Japan’s deeply negative real rates – and hence with the inverted yen – provides strong evidence that borrowing in yen at deeply negative real rates has fuelled the latest inflation in US tech valuations,” the firm explained.The rally in tech valuations received a major boost following the launch of ChatGPT-4 in March 2023, however, BCA argues that the surge was not solely a product of that launch.While AI hype provided a narrative for the massive flows into US tech, the underlying cause has been yen-funded borrowing at deeply negative real rates, BCA notes.