Japan has been running the world’s biggest “cheap money machine” for over 30 years. They kept interest rates near zero, borrowed freely, and the whole world quietly benefited. Banks, hedge funds, and big investors borrowed Japanese yen for almost free and invested that money everywhere in US stocks, Indian markets, real estate, tech companies, you name it.
That era is cracking.
Japan’s long-term interest rates just jumped to levels last seen in the 90s. For a country with massive debt, higher rates are dangerous. If Japan raises rates more, their own debt becomes too expensive. If they don’t raise rates, inflation eats their economy. They’re stuck.
The scary part for the world: when Japanese rates rise, the famous “yen carry trade” becomes unprofitable. Investors will be forced to unwind, meaning they start selling global assets fast. Stocks fall, currencies shake, volatility spikes.
This isn’t about recession. It’s a big shift in how global money flows.
Do you think markets are ready for this, or are we sleepwalking into something bigger?