The Bank of Japan hiking to 1% is a slow-burning fuse, not a dud. The yen carry trade — worth anywhere from $261 billion to several trillion depending on how you measure it — has quietly funded global tech, crypto and leveraged equities for decades, and now that cheap money is getting pricier. Japanese households are moving savings into investment accounts at record pace, draining the very ballast that kept prior shocks from becoming catastrophes.
Raising rates to 1% and watching the yen barely budge tells you everything — the real problem was never the price of money, it was the mountain of debt underneath it. Japan is the world's most indebted major economy, and no rate hike is going to restore confidence in a currency propped up by decades of borrowing. Markets haven't priced that reckoning yet, but when they do, no amount of careful central bank signaling will soften the landing.
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