Japan's Rate Hike Sparks Yen Carry Trade Unwind Fears

 Japan's Rate Hike Sparks Yen Carry Trade Unwind Fears

Tokyo — The Bank of Japan raised its benchmark interest rate by 25 basis points to 0.75%, the highest in 30 years, signaling more hikes amid economic recovery and rising inflation. Analyst Lena Petrova warns this could unwind the decades-old yen carry trade, where investors borrow cheap yen to fund global assets. Estimated positions worth hundreds of billions to trillions face erosion as yen strengthens and differentials shrink. Emerging market currencies like the Mexican peso and Brazilian real have weakened in response. Capital repatriation to Japan, holding $4.9 trillion overseas including US debt, risks deleveraging shocks. The host predicts gradual but systemic risks, potentially triggering a US economic crisis. Markets reacted with USD/JPY volatility but no immediate crash. Analysts see a regime shift ending the "free money" era. What questions do you have? Please share your opinion below 👇