The biggest systemic risk to markets right now. Will it be the pin to pop the “everything bubble?”
The yen carry trade has long been the financial world’s favorite magic trick: borrow yen at 0%, sell it for dollars, then plow the proceeds into whatever shiny thing is booming that month: U.S. tech stocks, crypto, high-yield junk, you name it.
For two whole decades “investors” (cough speculators) congratulated themselves on their “genius,” never mind that the entire scheme rested on the Bank of Japan pinning its 10-year yield near 0.0% like a butterfly to cardboard.
Now that yield sits at 1.87%, the highest since 2007, and the yen is beginning to twitch after a 30-year slumber.
Take note:
Should the currency strengthen even 10–20%, every brilliant investor who borrowed trillions of cheap yen will discover that leverage works both ways… chiefly the wrong way once the yen stops playing dead.
Positions will unwind, liquidity will evaporate, and the world will remember, briefly and painfully, that “free money” was never actually free.
As for when this punch bowl gets yanked away, the arithmetic suggests the party starts ending early to mid-2026, when rising JGB yields finally make borrowing in yen look less like a clever strategy and more like an overdue margin call from reality.
Invest and plan accordingly!
