For over a decade, global financial markets relied on the “yen carry trade,” the practice of borrowing cheap Japanese yen and investing it in higher-yielding assets elsewhere, from U.S. Treasury bonds to tech stocks.
Starting in 2023, Nipponese bond yields began to inch up, surging higher in 2025:
Japanese bond yields now trade at levels last seen in 1999 – and are headed up, not down. (Source: CNBC)
During its peak in early August 2024, a global “market Armageddon” saw the Japanese Nikkei 225 index suffer its worst three-day decline in history (losing over 20% in some measures) and a violent, synchronized sell-off in U.S. momentum tech stocks.
Because the carry trade fueled “AI fever,” its unwinding caused massive selling pressure on high-performing U.S. stocks in the S&P 500 Index.
The event triggered a market-wide margin call – a sudden reversal triggered automatic risk management systems. The feedback loop in which falling asset prices forced further liquidation.
While the Bank of Japan only raised its benchmark rate by a modest 0.25%, this move shattered expectations of an endless cheap yen, triggering a sudden rush to cover short yen positions.
Over the weekend, Japanese 30-year government bond (JGB) yields surged to their highest level in over 20 years.
While the “energy shock” from Iran will exert temporary pressure on central banks to raise rates, the soaring yield on Japanese bonds will endure and impact liquidity across global trading centers far more.
~ Addison
P.S. Grey Swan Live! was in top form last week with Ian King. We had attendees from the four corners of the continent, from Seattle to Boca Raton, Ontario to Baton Rouge. Arizona and Alabama. If you’re a Grey Swan member, it’s worth your time to join Grey Swan Live! on Thursdays. It’s one of the primary benefits of your membership!
Ian’s been out front on the crypto revolution for a decade. The K-Street rumor mill is hot in Washington, D.C. this week with breakthrough news of a deal between the banking lobby and digital asset innovators.
Ian explained how and why the banking cartel is trying to defend its monopoly over the nation’s savings, and how the innovators at crypto companies have positioned themselves to benefit their customers when the Clarity Act finally gets sent up to the Oval Office.
The implications on everything from tokenization to Defi are profound. We specifically ran through all of the companies listed in the “Dollar 2.0” recommendations in our digital asset special report in the Grey Swan library.
