For thirty years the yen funded the world. That era is closing.

For three decades, Japan exported something more valuable than cars: cheap money. With interest rates pinned near zero, the yen became the world's favourite thing to borrow. Investors from Sydney to Connecticut took out yen loans that cost almost nothing and parked the proceeds in assets that paid more, pocketing the difference. Economists call this the carry trade. Everyone else called it free money.

That era is closing. Japan's ten-year government bond yield has climbed to 2.9%, a level last seen in 1996, and the twenty-year now fetches 3.9%. As borrowing at home grows dearer, Japanese savers are bringing their capital back: in the first quarter of 2026 alone they sold $29.6bn of American Treasuries. A patient, price-insensitive buyer of the world's most important bond is heading for the exit.

The mechanism is unglamorous but powerful. A carry trade works like borrowing from a friend who charges almost nothing, then lending the money onward at 5%; the profit is the spread, and the spread survives only while the friend stays generous. When Tokyo stops being generous, portfolios from New York to São Paulo have to adjust.

The cheapest money in the world sat in Tokyo for a generation.

The world is about to find out how much it was leaning on it.