Japan is About to Break the System

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Most people aren’t paying attention to Japan right now — and that could be a massive mistake.

Japan isn’t just another foreign economy. It’s the fourth largest economy in the world and one of the largest holders and funders of global debt. For decades, near-zero and negative interest rates turned the Japanese yen into the cheapest funding currency on earth, quietly financing trillions of dollars in global leverage across U.S. Treasuries, equities, real estate, and even crypto.

But that system is starting to crack.

In early 2024, the Bank of Japan ended negative interest rates and began raising rates, putting enormous pressure on the Japanese yen carry trade — a trade estimated to exceed $20 trillion in exposure. When borrowing costs rise and volatility increases, leveraged positions don’t unwind slowly. They’re forced to unwind.

In this video, I break down:
• Why Japan’s interest rate policy matters to global markets
• How the Japanese yen carry trade works — and why it’s so dangerous
• What rising Japanese bond yields are signaling right now
• How this could impact U.S. Treasuries, stocks, and crypto
• Why currency markets and interest rate differentials are becoming a major risk
• Whether the Fed’s recent reserve management purchases could be preparing for a liquidity shock

This isn’t just a Japan problem. If the yen carry trade reverses in a disorderly way, the impact could ripple through every major asset class.