For nearly 30 years, investors have relied on a popular trick called the “carry trade” that is now showing signs of cracking.
- Investors borrowed cheap yen to buy higher-yielding assets, like U.S. Treasury bonds.
- Japan acted as a massive source of low-cost money, fueling this strategy for decades.
- Analysts now warn that this “snowball” of debt has grown too large to ignore.
- As Japan changes its financial approach, this easy-money engine is stalling out.
If this mechanism breaks, it could create significant instability for the global economy.