Sensei Insights: The Great Carry Trade Unwind – A Storm That’s Been Decades in the Making

Friday, May 31, 2025 — Rising JGB Yields, Crypto Signals, and the Quiet Shift in Global Liquidity

💴 Japan’s Carry Trade Unwinds — A Hidden Risk for U.S. Markets

Rising JGB yields threaten global liquidity and U.S. asset prices

Japan’s decades-long role as the world’s low-interest-rate lender is unravelling — and U.S. markets could be the next to feel the tremors.

For years, global investors tapped into ultra-cheap yen to fund higher-yielding bets across the globe — from U.S. Treasuries to tech stocks and emerging markets. This strategy, known as the yen carry trade, was quietly one of the most powerful forces in global finance.

But now, that engine is stalling.

With the Bank of Japan hiking rates for the first time in 17 years and 30-year JGB yields spiking to multi-decade highs, the carry trade is rapidly unwinding. Japanese investors — some of the largest holders of U.S. debt — are starting to repatriate capital. The consequences are already visible: U.S. Treasury yields are drifting higher, and pressure is building under equity markets still trying to digest trade tensions and fiscal fragility.

📊 Analysts warn the reversal of this $1–4 trillion trade could trigger a wave of asset sales — especially in U.S. tech and momentum stocks, which have been popular destinations for yen-funded liquidity.

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Carry Trade 101: Borrow Low, Invest High