25 - 31 May 2026

Land of the rising yields

This week’s insights include:

Cheap money is getting more expensive: For 30 years, investors everywhere could borrow yen at near-zero rates and reinvest it abroad for more. But the BOJ has now increased its interest rates four times, and last month Japan's 10-year yield hit 2% for the first time since 1999.
Japan's capital is coming home: Japan held around $1.2 trillion in US Treasuries as Washington's biggest foreign lender, plus trillions more worldwide. With yields climbing at home, that capital has a good reason to stay.
From Tokyo to Wall Street: A huge share of global investing is still funded by borrowed yen. As that "carry trade" unwinds, the effects spill well past Japan. The end of cheap Japanese money isn't really a Japan story, it's a global liquidity story.

This week's Market Insights article is a 7 minute read!

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Hi everyone,

For 30 years, there was something close to free money in global markets. Borrowing Japanese Yen.

The playbook was simple. Borrow yen at near-zero rates, convert it, and invest somewhere paying more. Investors, institutions and governments did exactly that, on a scale big enough to help fund everything from US mortgages to global stocks.

That era could now be ending.

The Bank of Japan has raised rates four times since 2024, and last month Japan's 10-year bond yield hit 2% for the first time since 1999. The world's cheapest money suddenly isn't so cheap.

So what happens to all the markets once this real-life cheat code gets patched?

This week we trace where three decades of cheap money actually went, why Japanese capital is heading home, and what the end of the era could mean for markets far beyond Tokyo.

QUOTE OF THE WEEK

“You can't unwind the biggest carry trade the world has ever seen without breaking a few heads.”

~ Kit Juckes

This week in the markets

Here’s a quick summary of what’s been going on:

AI rally pushes US markets to fresh highs.
China's factory profits rebound despite trade and deflation pressures.
Hong Kong is now the world's largest wealth hub.
Micron and SK Hynix join the trillion-dollar club.

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Japanese yields are rewriting the playbook...

This isn't hypothetical, the plumbing is well documented. The IMF has shown how cheap Japanese borrowing helped fund the US mortgage market, and over the years Japan's net overseas investments swelled to around $3.85 trillion, making it the world's largest net creditor for 34 straight years.

That run has just ended. Japan has slipped behind China and Germany, its share of US Treasuries has roughly halved over the past decade, and its own companies raised more than $130 billion in foreign funding last year. The money isn't just slowing... in some places, it's already flowing the other way.

So what actually shifts when the world's cheapest money dries up? Three things we dig into:

Which companies are most exposed: The businesses that leaned hardest on cheap funding. Those with high debt, constant refinancing, weak cash flow, or valuations built on far-off profits could have the most to lose as borrowing costs climb.
The knock-on for US bonds: With Japan stepping back as the largest foreign holder of US Treasuries, fading demand could lift yields and corporate borrowing costs, and we look at which parts of the credit market feel it first.
How far the carry trade could unwind: Trillions are still riding on borrowed yen. We unpack the two triggers that could speed things up (a rebounding yen and a drop in the assets it funded).

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Join the discussion by leaving a comment!

Do you see the end of cheap Japanese money as a real risk to global markets, or is it being overblown?

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Key events next week

Tuesday