Japan's Rate Hike Unwinds a Dangerous Bet Across Asia

Japan's stock market fell 5.81% on August 2, 2024—its worst day since 2020—as investors rushed to unwind trades built on cheap yen borrowing. For years, traders borrowed yen at low rates and invested globally for higher returns. When the Bank of Japan raised rates, those bets became expensive fast, triggering forced selling across Tokyo, Seoul, and Sydney. The region's boom had depended on cheap money.