The Bank of Japan has flagged a risk of inflation overshooting its target and signaled clear intent to raise interest rates further. This tightens the yen carry-trade unwind thesis and puts pressure on risk assets funded in cheap JPY.
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The AngleGenuinely two-sided
Bull case
If the BOJ follows through with a rate hike, the interest-rate differential between Japan and the US narrows, mechanically supporting a stronger yen and accelerating the unwind of the estimated $4 trillion yen carry trade stack.
Bear case
The BOJ has a long history of hawkish signaling followed by inaction — if global growth softens or Japanese data disappoints, the bank could pause, leaving USD/JPY range-bound and carry trades intact.
Both sides — weigh them yourself