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What is the yen carry trade, and how does a 3% JGB yield reach Singapore?

The yen carry trade borrows cheap yen to buy higher-yielding assets elsewhere. With Japan's 10-year yield above 3% in 2026, here is how the trade works, how big it is, what happened on 5 August 2024 and what the Singapore dollar did.

CapsWindowPublished: 9 October 2026

Interest ratesExchange rateJPYBond yields

Key takeaways

A yen carry trade borrows in yen at low interest, converts the money into another currency and buys higher-yielding assets. It pays as long as the yen stays weak; when the yen jumps, positions are closed together and markets fall at the same time.
On 5 August 2024 the Nikkei 225 fell 12.40% and the yen rose 11.0% against the US dollar from 10 July. Against the Singapore dollar the yen rose about 10.2% over the same span (FRED H.10, computed).
The Bank of Japan has raised its policy rate to 1.25% (18 September 2026), and the 10-year JGB yield closed above 3% on 2 September 2026 for the first time since 1996. The yen is still weak because the US-Japan two-year gap widened from 2.27 to 2.86 points this year.
Two one-week yen rallies of about 4% in August and September 2026 lifted the yen about 3.6% against the Singapore dollar each time. ASEAN currencies have not been a main target of yen-funded carry trades, according to AMRO.

Japan’s 10-year government bond yield crossed 3% in September 2026, a level last seen in 1996. For two decades near-zero Japanese rates made the yen the world’s cheapest currency to borrow. This note explains the carry trade built on that, and the route by which its unwinding reaches Singapore.

What is the yen carry trade?

It is a bet that an interest rate gap will pay more than any currency move costs. The trade has four steps.

Visual guide

What is the yen carry trade?

1. Borrow
What happens
Borrow yen at Japan’s low rate
What can go wrong
Japanese rates rise
2. Convert
What happens
Sell the yen for US dollars or another currency
What can go wrong
The yen strengthens
3. Invest
What happens
Buy higher-yielding bonds, equities or deposits
What can go wrong
Those assets fall
4. Unwind
What happens
Sell the assets, buy back yen, repay
What can go wrong
Everyone exits at once

Selected entries from the table below. Its dates, units, definitions and limitations still apply.

Sources ↓

Step	What happens	What can go wrong
1. Borrow	Borrow yen at Japan’s low rate	Japanese rates rise
2. Convert	Sell the yen for US dollars or another currency	The yen strengthens
3. Invest	Buy higher-yielding bonds, equities or deposits	Those assets fall
4. Unwind	Sell the assets, buy back yen, repay	Everyone exits at once

The danger is in step 4. A rising yen raises the cost of repayment, which pushes more holders to sell, which pushes the yen higher still.

How large is it?

Estimates vary with the definition. The BIS Quarterly Review of September 2024 gave three measures.

Measure (BIS)	Size
Yen credit to non-banks outside Japan, 2024Q1	about US$880 billion (¥133 trillion)
of which yen loans	about US$271 billion (¥41 trillion, up from ¥25 trillion in 2021Q2)
Yen FX swaps and forwards, notional, end-2023	US$14.2 trillion

The swap figure is large but mostly reflects hedging and funding, not speculative carry. No public figure isolates the carry trade alone.

What happened on 5 August 2024?

−12.40%

Nikkei 225 on 5 August 2024, to 31,458.42. The 4,451.28-point fall was the largest on record (Nikkei Indexes)

The Bank of Japan raised its rate to 0.25% on 31 July 2024. Weak US data followed, and the yen surged. The rate went from 161.73 yen per US dollar on 10 July to 143.95 on 5 August, an 11.0% gain for the yen (FRED). The VIX volatility index closed at 38.57 that day, up from 23.39 on 2 August (FRED VIXCLS). BIS Bulletin 90 describes leveraged positions in equity and currency markets being forced to unwind, which magnified the reaction to a weak US data release.

Date	USD/SGD	SGD per ¥100
10 July 2024	1.3486	0.834
5 August 2024	1.3226	0.919
Change	Singapore dollar +2.0% vs US dollar	yen +10.2% vs Singapore dollar

The SGD per ¥100 column is computed from the FRED H.10 rates for USD/SGD and USD/JPY. The Singapore dollar gained on the US dollar but lost ground to the yen. Monthly averages tell the same story: S$0.8543 per ¥100 in July 2024 and S$0.8992 in August.

How far have Japanese rates risen in 2026?

Bank of Japan decision	Policy rate	10-year JGB that day (MOF)
19 March 2024	negative rate ended	0.744%
31 July 2024	0.25%	1.07%
24 January 2025	0.5%	1.238%
19 December 2025	0.75%	2.021%
16 June 2026	1.0%	2.655%
18 September 2026	1.25% (7-2 vote)	2.981%

The 18 September decision took the policy rate to its highest since 1995. The 10-year JGB first closed above 3% on 2 September 2026 (3.006%) and reached 3.111% on 7 October. The next meeting is on 29-30 October.

Why is the yen still weak, and how fast can it turn?

Japanese rates rose, but US rates rose more. The US two-year Treasury yield minus Japan’s two-year yield went from 2.27 points on 5 January 2026 to 2.86 on 6 October. In July 2024, just before the unwind, it was 4.28. The gap that pays carry traders has widened again this year.

Sudden reversals still happen, and they are fast.

Episode	USD/JPY	Yen move	SGD per ¥100
29 July to 3 August 2026	163.86 to 156.96	+4.2%	0.789 to 0.817 (+3.6%)
1 to 9 September 2026	160.03 to 153.50	+4.1%	0.795 to 0.824 (+3.6%)

Japan’s Ministry of Finance also intervened in the currency market for about ¥27.13 trillion in 2026, including operations from 30 July to 26 August.

What is the route into Singapore?

There are three channels, and the evidence for each differs.

Channel	What to watch	What the data show
Exchange rate	SGD per ¥100	0.8543 (July 2024), 0.8992 (August 2024), 0.8278 (December 2025), 0.8010 (June 2026), 0.8035 (August 2026), monthly averages
Global risk assets	Equity sell-offs when the trade unwinds	August 2024 was a global sell-off, led by Japan
Japanese money abroad	Japan’s holdings of US Treasuries	Down from US$1.2393 trillion (February 2026) to US$1.1039 trillion (July 2026), US Treasury TIC

The direct currency channel looks limited. AMRO wrote in April 2025 that ASEAN+3 currencies “have not been the preferred choice for yen-funded carry trade strategies” and that most “barely registered a reaction” in August 2024. For Singapore households, the visible effect is the price of yen: a holiday budget or a yen-denominated bill can change by several percent within a week.

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The SGD per ¥100 figures for single days are computed by dividing two FRED H.10 noon buying rates in New York; they are not official cross rates. This note does not quote a Straits Times Index change for 5 August 2024 because we could not confirm it from an exchange or index-provider record. Carry trade size estimates depend on definitions and do not show how much was closed in any episode.

Questions & answers

What is the yen carry trade in simple terms?

Borrow yen at a low interest rate, change it into another currency, and buy assets that pay more, such as US Treasuries or equities. The profit is the interest difference, as long as the yen does not rise. If the yen rises sharply, the borrower needs more of the other currency to repay, and many positions are closed at once.

How big is the yen carry trade?

There is no single number because definitions differ. The BIS estimated yen credit to non-banks outside Japan at about US$880 billion in the first quarter of 2024, of which yen loans were about US$271 billion. Yen-related FX swaps and forwards had a notional value of US$14.2 trillion at the end of 2023, though most of that is hedging rather than carry.

What happened to the Singapore dollar on 5 August 2024?

It strengthened against the US dollar but weakened against the yen. From 10 July to 5 August 2024, USD/SGD went from 1.3486 to 1.3226, while one hundred yen went from about S$0.834 to S$0.919, a rise of about 10.2% in the yen (computed from FRED H.10 rates).

Could a yen rally hit Singapore again?

Yen rallies have shown up here mainly as a higher SGD price for yen and as part of global equity sell-offs. AMRO noted in April 2025 that ASEAN+3 currencies were not the preferred targets of yen-funded carry trades and that most barely reacted to the August 2024 episode.

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