The yen carry trade is at risk of a violent unwinding—with potentially severe consequences for your wealth.
On Wednesday, the yen was trading above ¥160 to the dollar. Yesterday, it surged to as high as ¥155.4—an unusually large move for one of the world’s most important currencies.
Another catalyst could arrive today.
The US employment report will be released at 8:30 a.m. Eastern Time. If employment is weaker than expected, expectations for another US interest-rate hike could fall just as expectations for a Bank of Japan rate hike are rising.
That could strengthen the yen further and produce a painful fireworks display across currencies and other global financial markets.
Over the past month, Macro Watch has been preparing its subscribers for precisely this possibility through four videos:
1. The BOJ’s Radical Experiment covers 1999 to 2012, when the Bank of Japan pioneered zero interest rates and Quantitative Easing.
2. The BOJ Goes Ballistic covers 2013 to 2018, when the BOJ dramatically expanded Quantitative Easing and ultimately introduced negative interest rates and Yield Curve Control.
3. Japan Could Shake Global Markets Again explains Japanese monetary policy since 2018 and why the yen carry trade is now at risk.
4. The final video, published yesterday, is titled: Japan’s Monetary Reversal Could Wipe Out Trillions.
The yen’s sudden surge makes that warning particularly timely.
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