People do the Yen Carry Trade by borrowing Yen at a low interest rate (less than 1%) then take the borrowed Yen and invest it in higher interest rate Treasuries of another country (like the US around 5%) or into US tech stocks.
Basically the Japanese Central Bank has been running out of bullets to keep the Yen from devaluing below 150 Yen/Dollar. People doing the Yen Carry trade are essentially leveraged I'm their position and as the Yen devalues, they can lose their collateral for the borrowed yen and get liquidated on their trade.
Their options are to find more money to add to collateral and keep the Yen Trade going, hope the Yen doesn't keep devaluing and their trade gets liquidated, or unwind their carry trade and sell off their Treasuries/Tech Stocks for $ then convert to ¥en then give back the borrowed yen and sell anything leftover. Unwinding the trade also can devalue the yen as well, pushing more people to have to unwind or get liquidated as well.
There's a great explanation of the importance of the Yen Carry Trade on this thread
https://x.com/kurtsaltrichter/status/1775171880476889489
People do the Yen Carry Trade by borrowing Yen at a low interest rate (less than 1%) then take the borrowed Yen and invest it in higher interest rate Treasuries of another country (like the US around 5%) or into US tech stocks.
Basically the Japanese Central Bank has been running out of bullets to keep the Yen from devaluing below 150 Yen/Dollar. People doing the Yen Carry trade are essentially leveraged I'm their position and as the Yen devalues, they can lose their collateral for the borrowed yen and get liquidated on their trade.
Their options are to find more money to add to collateral and keep the Yen Trade going, hope the Yen doesn't keep devaluing and their trade gets liquidated, or unwind their carry trade and sell off their Treasuries/Tech Stocks for $ then convert to ¥en then give back the borrowed yen and sell anything leftover. Unwinding the trade also can devalue the yen as well, pushing more people to have to unwind or get liquidated as well.