Japanese Carry Trade Unwind: Risk and Structural Resilience Analysis

Bill’s report provides a detailed and contrasting analysis of the Japanese Yen Carry Trade, a strategy where investors borrow yen at low interest rates to purchase higher-yielding foreign assets, particularly focusing on volatility starting on November 10, 2025. The first section thoroughly defines the carry trade, explains its importance in generating global liquidity, and outlines the four main factors—such as a Japanese interest rate hike or a sharp yen strengthening—that could cause a disruptive unwind of the trade. The subsequent options present two opposing views: Option A warns retail investors of an imminent, systemic crisis in the next 45 days, urging vigilance for “red flags” like a hawkish Bank of Japan (BoJ) signal or weak US Treasury demand. Conversely, Option B offers an institutional perspective, arguing that the anticipated “Great Unwind” is an obsolete theory, citing empirical data from November 2025 showing that US markets remained resilient, the yen weakened, and the rise in Japanese yields was due to fiscal risk (Sakaenomics) rather than monetary tightening, suggesting the carry trade remains structurally sound.