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The yen carry-trade unwind and the Aug 5, 2024 crash
Aug 5, 2024· Crisis or event
Fact, law or dataA rule, statute, definition or measured number.
A rapid exit from yen-funded bets in summer 2024 that sent Japan's Nikkei down 12.4% on August 5.
See it on the Money & Finance map →How it works
With Japanese rates near zero, investors had borrowed yen to buy higher-yielding assets, and the yen sank to about 162 per dollar in July 2024. Japan then bought yen, the Bank of Japan raised rates on July 31, and a weak US jobs report on August 2 raised odds of Fed cuts. The yen jumped toward 142, forcing leveraged traders to sell assets to repay yen loans. The Nikkei's August 5 drop was its worst since 1987; the VIX topped 65. Markets recovered within weeks.
Why it matters
It showed how a modest rate move in Tokyo can ripple through global stocks, and how leverage hidden in carry trades amplifies shocks.
Facts, rules and data
Exchange records for the Nikkei and VIX, Bank of Japan and Finance Ministry statements, and a BIS bulletin analyzing the unwind (August 2024).
Debates and risks
How much of the carry trade actually unwound, and how much remains, is unknown; estimates varied widely afterward.
Connections (2)
▸The yen carry-trade unwind and the Aug 5, 2024 crash drove a 12.4% one-day plunge in Nikkei 225: from the 1989 peak to new records in 2024Fact, law or data
The connection
Investors had borrowed cheap yen to buy higher-yielding assets, including Japanese stocks. After the BOJ raised rates on July 31, 2024, and a weak US jobs report on August 2, the yen jumped, forcing borrowers to sell. On August 5 the Nikkei fell 12.4%, its worst day since 1987, then rebounded 10.2% the next day.
When and why
Tokyo and global markets, July 31 to August 6, 2024; the BOJ under Governor Kazuo Ueda, hedge funds and leveraged retail traders.
How we know
Exchange price records, BOJ and Ministry of Finance statements, and BIS analysis of the carry-trade unwind published in 2024.
Debates and risks
How large the yen carry trade really was, and how much remains; estimates range from hundreds of billions to several trillion dollars.
▸The yen carry-trade unwind and the Aug 5, 2024 crash began with a sudden surge in The Japanese yen: safe haven and cheap funding currencyFact, law or data
The connection
The yen rose from about 162 per dollar in early July 2024 to about 142 by August 5, after Japan's intervention, the July 31 Bank of Japan rate hike and weak US jobs data. A stronger yen raised the cost of repaying yen loans, forcing traders to sell assets and buy yen, which pushed the yen higher still.
When and why
Tokyo, New York and global markets, July 11 to August 5, 2024.
How we know
Exchange-rate records, Japan's Finance Ministry intervention data and the BIS August 2024 bulletin.
Debates and risks
Whether the yen surge or the weak US jobs report did more to trigger the selloff is debated.