Japan Faces Crisis with Disastrous $20 Trillion Carry Trade

On a day marked by a significant drop in the Japanese yen, driven by speculative news about a potential Bank of Japan rate hike, the focus shifts to Japan’s larger, more troubling economic picture. According to Deutsche Bank’s chief FX strategist George Saravelos, Japan’s economy is trapped in a precarious situation. It faces a stark choice between hyperinflation with a currency collapse or a market crash leading to social unrest. This dilemma is rooted in Japan’s massive $20 trillion carry trade, which complicates any attempts at monetary policy normalization and underscores the deep-seated challenges facing the Japanese economy.