The news are everywhere, particularly amongst the breathless LinkedIn and Facebook pundits: The recent pivot of BOJ towards higher rates marks the end of the yen carry trade, so they predict all manner of imminent market disasters. Well..
Given that BOJ has been telegraphing its intentions for months, markets had - of course - already pivoted away from the yen as a low cost funding currency. Just take a look at the data from the Bank of International Settlements: Yen credit growth to non-residents (aka the carry trade, mostly) plunged to zero many months ago (panel C below). Therefore, don't expect a sudden plunge in markets just because the yen carry trade is no longer operable - participants exited long ago.
What has taken its place? The euro carry trade (panel B), since euro interest rates are lower than dollar rates, though probably not for much longer if the Fed keeps cutting rates.
Note: the BIS data are current up to 2Q2025. Data for 3Q2025 will be available early 2026.
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