🚨🇯🇵 JAPAN'S 10-YEAR JUST HIT 3%. FIRST TIME SINCE 1996. It's a bigger problem than you can imagine. For 30 years the most important trade on earth worked like this: Borrow yen in Tokyo at zero (or even negative) % . Sell the yen, buy dollars. Put the dollars into anything that pays yield: US Treasuries at 2-3%, indexes, stocks, emerging-market debt, real estate. Keep the difference. Repay the loan later in a currency that only ever gets cheaper. Free money, as long as two things stay true: Japan pays you nothing to stay, and the yen doesn't rise. The size of this scheme became too massive. Deutsche Bank once sized the full structure: Japan's entire borrow-short, lend-abroad balance sheet is at $20 TRILLION and called it the biggest carry trade in history. Japan is the world's largest creditor: roughly $3.5 trillion of net foreign assets, over $1 trillion of it in US Treasuries, the biggest foreign lender to America. Its pension whale GPIF alone runs $2 trillion, about half of it parked abroad. Today, crossing 3% killed both legs of the trade at once. > The funding leg: borrowing yen is no longer free because the BoJ is will hike rates to 1.25%. > The asset leg: Japanese funds can now earn 3% at home, in its own currency with no FX risk, while Treasury after paying to hedge the dollar, hands it less than that. It already started unwinding this summer: Treasuries out-yielded the carry trade for only the second time on record. For perspective, in August 2024: ONE BoJ hike to just 0.25% and the Nikkei lost 12% in a day, margin calls hit every market on earth within 48 hours. Imagine how big the leverage on those trades is. If you started trading 30 years ago, you had never seen Japan pay 3%. As of this morning, you have. The global crisis is already here.