Yen Weakness and Carry Trade Unwind

19 Sept 2026

The yen’s weakness reflects a deep mismatch between Japan’s ultra-loose monetary stance and higher rates abroad, which has made borrowing in yen and investing elsewhere highly attractive. That carry trade now leaves markets vulnerable because even a modest shift in Bank of Japan policy can trigger rapid unwinds. The stakes extend beyond currency moves: a weaker yen raises import costs for energy and food, squeezes households, and can unsettle Japan’s bond market. If the trade reverses quickly, funding stress could spill into global currencies, bonds, and broader risk assets.