Yen Carry Trade Risks Rise in August 2026 as BOJ Rate Hits 1%, a 31-Year High
In August 2026, yen carry trade risks intensified after the Bank of Japan raised its policy rate to 1%, the highest in 31 years. The move followed four hikes since March 2024, when the BOJ ended negative rates. Japan's core CPI stood at 1.9%, near the 2% target, while USD/JPY remained around 159 after US-Japan intervention.
After the joint US-Japan intervention in late July, the dollar held near 159 yen. Japan's July consumer price index (CPI) and core CPI both approached the central bank's 2% target, with core CPI at 1.9%.
Since the Bank of Japan raised its policy rate to a range of 0% to 0.1% and ended negative interest rates on March 19, 2024, the central bank has implemented four subsequent hikes in July 2024, January 2025, December 2025, and June 2026, bringing the policy rate to 1%, the highest level in 31 years.
Additionally, in August, global popular technology stocks and long-dated global bonds underwent significant adjustments, narrowing the return space for carry trades and posing a potential risk to yen carry trades.