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Yen and Global stock markets

The yen gained sharply against the US dollar after the BOJ monetary policy. The Bank of Japan hiked rates by 15 bpbs unexpectedly from 0%-0.10% to 0.15%-0.25%. The central bank has reduced its bond-buying program to ¥3 trillion monthly as of Q1 of 2026.

 

Yen Carry trade-

 

Most of traders borrow yen at low interest rates and invest in other countries' assets, especially the US stock market.

 

JPY strengthened strongly after the BOJ rate hike. The trader started to unwind their position in the US stock market as they paid higher interest rates due to rate hikes and huge forex loss (USDJPY depreciated from 155.21 to 141.68 in the past four days.

 

This will increase the selling pressure on US stocks in the short term. Market eyes Middle East tension escalation, recession fears, and US political uncertainty.

 

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