(Bloomberg) — Japan’s currency was at the center of a global market meltdown in early August when a decision by the nation’s central bank sparked a panic from Tokyo to Europe and New York. Fueling the wild market gyrations was the surging yen, which was suddenly super-charged following a hawkish move by the Bank of Japan.
In the Bloomberg Originals mini-documentary Why the Japanese Yen Is So Volatile, we explain how the yen had been used to fund purchases of everything from emerging-market currencies to tech stocks—so-called carry trades. We also show why investors across the globe had to cover losses when—thanks in part to a rise in Japanese interest rates—their bets backfired in spectacular fashion.
From tourism to manufacturing, equity markets to corporate bonds, the whipsawing yen—the third-most traded currency in the world—has suddenly made investing in Japan more risky. Domestically, it’s also become a topic of frenzied debate among small business owners, political leaders and everyone in between, since a weak yen had helped rekindle inflation in Japan’s sluggish economy.
In Why the Japanese Yen Is So Volatile, we show how investors are now rethinking the role of Japan’s currency—and how their conclusion could influence the economic landscape of the world’s fourth largest economy.
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