The Japanese yen has moved sharply higher against the US dollar, with the exchange rate near ¥153 per dollar. At one point, the yen reached about ¥152.89 per dollar, its strongest level since February. The move has gained attention because markets now place a very high probability on a Bank of Japan rate increase at its next policy meeting.
The main issue is not simply that the yen has become stronger. The larger concern is that a faster rise in the yen could put pressure on the yen carry trade. This trade has existed for many years. Investors borrow yen at relatively low rates and use the funds to buy assets that offer higher returns elsewhere. If the yen rises quickly, the cost of closing those positions can rise. That can force investors to sell other assets.
At present, there is no clear evidence that the market has entered another 2024-style carry-trade shock. The current move appears more orderly, partly because investors have had time to prepare for a possible BOJ rate increase. However, the size of yen-based borrowing means the issue remains important for global markets.
The situation therefore deserves close attention, but it would be premature to describe the current move as a confirmed financial crisis or a repeat of 2024.
The yen has made a notable move
The dollar bought about 153 yen on September 9, 2026. The yen has gained about 4% since the start of September. It has also moved substantially from the level near ¥164 per dollar seen in late July.
The change matters because currency moves affect Japanese companies, investors and monetary policy. A stronger yen makes imported goods cheaper in yen terms. This can reduce some inflation pressure. At the same time, it can reduce the yen value of overseas revenue earned by Japanese exporters.
The move also has a direct effect on investors who use the yen as a funding currency. A person who borrowed yen when the dollar was much stronger against the yen may face a larger cost when the position is closed.
The yen has therefore become an important market variable rather than a simple foreign-exchange story.
Why the Bank of Japan matters
The Bank of Japan has kept its policy rate at around 1.0% after its June 17, 2026 decision. Its next monetary policy meeting is scheduled for September 17 and 18, 2026.
Markets now expect a possible 25 basis point increase to 1.25% at that meeting. Some market measures have placed the probability of a September hike close to certainty. There have also been reports that the BOJ is considering a faster pace of future rate increases, although this does not mean that a large increase is certain.
A normal 25 basis point increase would take the policy rate from 1.00% to 1.25%. That would be a relatively small change in absolute terms. Its importance comes from the direction of policy.
For many years, Japan had extremely low interest rates. That made the yen attractive as a funding currency. A sustained move toward higher Japanese rates can reduce the appeal of this strategy.
The BOJ therefore faces a difficult balance. It needs to respond to inflation and wage pressure while also avoiding an unnecessary shock to households, companies and financial markets.
The carry trade is at the centre of the risk
The yen carry trade is simple in concept. An investor borrows yen at a relatively low cost. The investor then converts the yen into another currency and buys an asset with a higher expected return.
For example, an investor could borrow yen when one dollar is worth ¥160. Later, the exchange rate moves to ¥153. The investor now needs more dollars to obtain the same amount of yen required to repay the loan. The currency move can therefore reduce or eliminate the expected return.
The pressure becomes greater when investors use leverage. A small currency move can produce a much larger effect on the investor’s capital.
The size of the exposure is significant
There is no single reliable number for the total size of the global yen carry trade. It is difficult to measure because positions can exist through banks, hedge funds, derivatives and other structures.
One useful measure is cross-border yen borrowing. A reported estimate based on Bank for International Settlements data put this figure at about ¥360 trillion, or around $2.34 trillion, in March. This was described as the largest build-up of such borrowing in about three decades.
This number should not be treated as the exact size of the carry trade. It is a measure of yen borrowing and acts as a proxy for potential exposure.
US Commodity Futures Trading Commission data also showed net short yen positions of 92,227 contracts for the week to September 1. That was the third weekly increase, although it remained below the two-year high of 163,412 contracts recorded in the week to July 1.
Key data
| Measure | Current information |
|---|---|
| Dollar-yen exchange rate | Around ¥153 per dollar |
| Recent yen high | About ¥152.89 per dollar |
| Yen move since start of September | About 4% stronger |
| July dollar-yen peak | Near ¥164 |
| Current BOJ policy rate | 1.00% |
| Possible September BOJ rate | 1.25% |
| Possible increase | 25 basis points |
| BOJ meeting | September 17–18, 2026 |
| Cross-border yen borrowing in March | ¥360 trillion |
| Approximate dollar value | $2.34 trillion |
| Net short yen contracts to Sept. 1 | 92,227 |
| Two-year high in net short yen contracts | 163,412 |
These figures describe reported market conditions and estimates. They should not be treated as forecasts or as a statement that a particular market outcome is certain.
Why Japanese shares face pressure
A stronger yen can create problems for Japanese exporters.
Large Japanese companies often earn substantial revenue outside Japan. When those foreign earnings return to Japan, they must be converted into yen for financial reporting. If the yen is stronger, the same amount of foreign currency produces fewer yen.
This can affect reported revenue and profit expectations.
The impact is not the same for every Japanese company. Firms that rely heavily on overseas sales may face more pressure than companies with mainly domestic revenue. Importers can receive some benefit because foreign goods and raw materials can become cheaper in yen terms.
The stock market response therefore depends on the company and its business model.
On September 9, the Nikkei 225 fell about 0.2% to 65,142.78. This followed a sharp decline on Tuesday. The relatively small move on Wednesday suggests that investors have not treated the yen move as a new market crisis at this stage.
Revised second-quarter GDP data showed stronger growth, while real wages rose 2.4% year on year in July, the strongest increase since May 2021. These factors can provide some support to domestic parts of the Japanese economy.
Why this is different from 2024
The comparison with the 2024 carry-trade shock is understandable, but the two situations are not identical.
In July 2024, the BOJ delivered an unexpected rate increase. The yen then moved rapidly from around ¥154 per dollar to about ¥141 within days. The Nikkei suffered a one-day decline of 12.4%. The speed of the move created major pressure on leveraged positions.
The current situation has a different feature. Markets have had more warning that the BOJ may raise rates.
BOJ officials have provided signals about further policy normalisation. Market participants have therefore had more time to reduce some exposure or adjust their positions.
That does not remove the risk. It may simply reduce the chance of a sudden surprise.
A fast move in the yen could still create forced sales if investors have large leveraged positions. The key issue is not only the level of the yen. The speed of the move may matter just as much.
The BOJ has its own dilemma
A stronger yen creates both benefits and problems for the BOJ.
A stronger currency can reduce the cost of imports. That can help lower inflation pressure, especially when energy and other imported goods have high prices.
At the same time, a higher interest rate can slow domestic demand. It can raise borrowing costs for households and companies. It can also place pressure on businesses that depend on cheap credit.
The BOJ may therefore prefer a standard 25 basis point move rather than a larger 50 basis point increase. Such a decision could allow the central bank to continue its policy change without creating a large market shock.
There is also an important feedback effect. If the yen becomes much stronger before the BOJ meeting, the central bank may face less pressure to use a large rate increase to support the currency.
Recent market data has already shown this possibility. Japanese short-term government bond yields declined on September 9 as stronger yen expectations reduced some expectations for aggressive BOJ tightening.
What could happen to global markets
The yen carry trade has links to markets outside Japan.
If investors close yen-funded positions, they may need to sell assets purchased with those funds. Those assets could include foreign bonds, equities, emerging-market currencies and other higher-risk investments.
This does not mean every yen rise will create a global sell-off. Much depends on the size of leveraged positions, the speed of the currency move and investor confidence.
The risk becomes more serious if several factors occur at the same time. A sharp yen rally, a surprise BOJ decision and weakness in US or global equities could create a stronger feedback loop.
Technology and other high-value growth shares may receive particular attention because some investors view these areas as more exposed to forced sales during a broad reduction in risk.
However, there is no basis to state that such a sell-off must occur. Current evidence supports a risk assessment rather than a certain prediction.
The US side also matters
The yen does not trade in isolation.
The US Federal Reserve is also due to meet next week. US inflation data is due before that meeting. The relative direction of US and Japanese interest rates remains important for USD/JPY.
If US rates remain high while Japanese rates rise only gradually, the interest-rate gap between the two countries can remain large. That could limit the yen’s gains.
If US yields fall while Japanese rates rise, the gap could narrow more quickly. That could provide further support to the yen.
On September 9, the dollar fell to around 153.05 yen, while the US dollar index also declined. Market participants were watching both US Treasury yields and expectations for the BOJ.
This means the yen’s next major move may depend on two central banks rather than the BOJ alone.
What the market may watch next
The most important signal is the behaviour of USD/JPY around the ¥153 area.
A sustained move below this level would suggest that yen strength remains strong. A move back above ¥155 could indicate that some of the recent pressure has eased.
The BOJ’s September decision is another major event. A standard 25 basis point increase may already be reflected in market prices. If the BOJ delivers that outcome with cautious guidance, the market response could be limited.
A larger-than-expected increase or strong signals for further rapid hikes could create a different response.
The Fed decision also matters. A smaller US-Japan rate gap could support the yen. A wider gap could provide support for the dollar.
Main scenarios
| Scenario | Possible market effect |
|---|---|
| BOJ raises rates by 25 bp with cautious guidance | Limited additional yen reaction may occur |
| BOJ signals faster future hikes | Yen could face further upward pressure |
| BOJ delays a hike | Yen could weaken if expectations reverse |
| US yields fall sharply | Could support further yen gains |
| Yen rises very quickly | Carry-trade unwind risk could increase |
| Yen move stays orderly | Global market stress may remain limited |
| Japanese currency stays strong | Export-focused Japanese shares may remain under pressure |
These are analytical scenarios, not forecasts. Actual market outcomes can differ because prices reflect many factors at the same time.
The broader economic picture
Japan’s situation is not entirely negative.
A stronger yen can help households by lowering the yen cost of imported goods. It can also reduce some imported inflation. Higher wages and stronger domestic demand may support the economy if those gains remain durable.
The problem is the adjustment process.
Japan has spent many years with very low interest rates and a weak yen. A move toward higher rates and a stronger currency changes the environment for companies, investors and borrowers.
The transition can be difficult even if the long-term result is healthier monetary policy.
For Japanese exporters, the key issue is whether the yen remains near current levels or continues to rise rapidly. For the BOJ, the key issue is whether inflation and wages justify further rate increases without causing excessive pressure on economic activity.
Conclusion
The yen’s move toward ¥153 per dollar is an important market development. The rise reflects stronger expectations for BOJ rate increases, changes in investor positioning and wider shifts in the US-Japan interest-rate outlook.
The carry trade is the main source of concern because yen borrowing has been large for many years. Reported cross-border yen borrowing reached ¥360 trillion, while net short yen positions remained significant. These figures show why a rapid currency move could affect markets beyond Japan.
At the same time, the present situation should not automatically be described as a repeat of the 2024 crisis. The expected BOJ move is now much more widely known, and markets have had time to adjust. The Nikkei’s relatively modest 0.2% decline on September 9 also does not, by itself, show a broad market breakdown.
The most reasonable view is therefore cautious rather than alarmist. Yen strength has created a genuine risk for leveraged positions and Japanese exporters, but a major global carry-trade unwind is not yet established by the available evidence.
The next major test will come from the September 17–18 BOJ meeting, followed by the central bank’s guidance on future rate increases. The speed of the yen’s move after that decision may be more important than the rate decision itself.
This analysis is for general information only. It does not constitute investment, legal, tax or financial advice, and it should not be treated as a prediction of future market prices or returns.
