Japan just raised rates to 1.25%. Sounds small next to the Fed's 4%, but here's what matters: the yen carry trade.
For years people borrowed yen at basically zero and parked it in higher-yield stuff globally. Now Japan's tightening, the rate gap with the US is shrinking, and that trade is getting pricey to maintain.
Toss in the Fed's recent move and cheap money feels like it's drying up.
Will 1.25% shake things up? Hard to say. Could be priced in. Could be the start of something bigger. Markets don't need much to get spooked, and small ripples have a way of turning into waves.
For years people borrowed yen at basically zero and parked it in higher-yield stuff globally. Now Japan's tightening, the rate gap with the US is shrinking, and that trade is getting pricey to maintain.
Toss in the Fed's recent move and cheap money feels like it's drying up.
Will 1.25% shake things up? Hard to say. Could be priced in. Could be the start of something bigger. Markets don't need much to get spooked, and small ripples have a way of turning into waves.
