**Yen Strength Threatens Global Markets**

**USDJPY has fallen from 163.98 to 155.31**, **a 5.3% move in about five weeks**. The yen alone is up 2.5% this week, creating a serious risk for global markets.

**The trade is simple.** Investors borrow cheap yen, convert it into dollars, and buy assets such as US stocks and bonds. Because the loan is in yen, a stronger yen makes repayment more expensive.

**At 10x leverage**, a 5.3% move against the trade wipes out about 53% of the trader’s cash cushion. At 20x, it wipes out more than 100%. Forced selling, followed by more yen buying, can create a self-reinforcing unwind. The same loop drove the sharp global selloff in **August 2024**.

Japan has spent **$169.5 billion this year** trying to control the yen, including $52.8 billion in a single day. Markets now see a **75% chance of another Bank of Japan rate hike this month**, up from 24% a month ago. Higher rates make yen borrowing more expensive.

The size of the trade is unknown, but past estimates put it in the **hundreds of**…

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