How Japan’s Cheap Money Shaped the World And Why Everything Is Flipping Now For years, Japan quietly powered global markets by keeping interest rates near 0% and even negative from 2016. Borrowing became so cheap that investors took huge yen loans and moved the money into higher-yielding assets. This Japan carry trade — borrow at ~0%, invest at 4–10% — pushed trillions into U.S. stocks, bonds, real estate, crypto, and emerging markets. Japan was silently funding global growth. This made the world feel unusually “easy.” Cheap Japanese money kept mortgage rates lower, stock markets supported, governments funded, and liquidity flowing. But that foundation is now shifting. Japan’s interest rates have jumped to 1.73%, the highest since 2008. With massive national debt, higher rates cost Japan billions, so it can’t export cheap capital anymore. Instead, money is flowing out of global markets and back into Japan as pensions, insurers, and banks sell U.S. assets that no longer make sense financially. This has triggered a $1 trillion unwind — decades of trades built on cheap yen now reversing. That means selling across stocks, U.S. bonds, crypto, and emerging markets. When the world loses its cheapest money source, everything reprices. The lesson ties directly to the mortgage and compounding post: Debt only works when interest is cheap. Once rates rise, debt becomes dangerous. Japan’s cheap money inflated global markets for years. Now, as rates rise and capital returns home, markets are losing a major pillar. Make compound interest work for you, not against you.