Yen Carry Trade Unwind Triggers Asia's Worst Market Day in Years

Japan's Nikkei 225 plunged 5.81% on August 2, 2024—its worst day since March 2020—after the Bank of Japan's rate hike in March began unwinding the yen carry trade. Leveraged investors who had borrowed cheaply in yen to fund higher-yielding global assets faced margin calls and forced liquidations. The synchronized collapse across Tokyo, Seoul, and Sydney reflected the scale of embedded yen-funded leverage, revealing how reliant the region's rally had become on cheap borrowing conditions.