JAPAN JUST DETONATED THE GLOBAL CARRY TRADE — AND MARKETS HAVE 60 DAYS TO REPRICE!!

Date: November 19, 2025

Source: Hal Turner

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Japan just dropped a $110B stimulus bomb, and global markets immediately felt the shockwave.  The "Carry-Trade" just got smashed out of existence. The fallout will be everywhere, in everything, at the same time.

Bond yields jumped to 1.73%.The US–Japan rate gap collapses from 3.5% → 2.4% in just ten months.And with that, the math behind $1.2 trillion in global carry trades just broke.

The Trade That Carried the World

For 30 years, hedge funds ran the same play:Borrow yen at 0% → Buy US stocks, Emerging Market debt, real estate, crypto → Pocket the spread.With leverage? That became 

40% annual returns for doing nothing.

But now the spread is gone — and after hedging, the trade is outright negative.

This isn't sentiment. It’s arithmetic.

Why This Happened

Japan’s stimulus isn’t creating inflation. It’s creating yield.• Money velocity has collapsed to 1.42, down 29% since 2000• Consumers save stimulus instead of spending it

• AI slashes service inflation by ~40%

• China exports deflation with industrial overcapacity

Prices stay flat, but bond yields rise because debt supply explodes.

Japan must issue $110B → buyers demand higher yields → debt service becomes a monster.

At 263% debt-to-GDP, every +1% in yield costs Japan $26B/year.This forces yields higher… without inflation. 

The Result

The interest-rate advantage vanishes.Borrowing in yen to buy dollars now loses money. So every institution running this trade faces the same choice: Exit or bleed out.

Over $500B in carry positions must unwind.

No panic — just legal fiduciary requirement.But the second wave is worse. Japan Pulls Capital HomeJapanese institutions hold $3.2T in foreign assets.

For the first time in decades, domestic bonds actually pay something. Capital repatriates.

The world’s biggest creditor becomes a seller, not a buyer.When $800B of global liquidity exits, markets don’t drift down —  they gap down until forced sellers meet any buyer at any price.

Here’s What the Models Show

• US equity multiples compress 21x → 16x

• Nikkei drops 12% as a stronger yen crushes exporters

• Emerging markets lose ~30% of external funding

• Credit spreads blow out 100 bpsLiquidity disappears.

Not because of recession —  because the firehose of cheap yen is shutting off.

Enter the Fed

The Fed ending Quantitative Tightening on Dec 1 isn’t stimulus — it’s surrender.They see Japanese capital evaporating.

The only buyer left for Treasuries…  is the Fed itself.

This is fiscal dominance.This is the regime change everyone ignored.

Deflation vs. Liquidity

Japan’s move proves the new global equation:Technology deflates faster than government spending inflates.The collision doesn’t create balance —  it creates chaos.

Bottom Line

This isn’t a forecast.

This is the mechanical outcome of a yield shift in the world’s most overleveraged bond market.

Prepare for the regime break — or risk becoming part of the fallout.This will hit everything, everywhere, at the same time..... 

$500 Billion in Japan "Carry-Trade" must now be sold-off or the Interest costs will break the people who borrowed Yen at Zero percent, to buy US Stocks.   

Five-Hundred Billion has to come out of the US markets !