The Bankrise ofin Japaninterest hikingrates 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 a 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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