#DanielNadem

The latest macro data confirms a historic shift: Japan’s core inflation held steady at 3.0% in November 2025, officially crossing above the U.S. CPI, which cooled to 2.7% in December. This is the first time in 46 years that Japan’s inflation has outpaced that of the United States, marking a definitive end to Japan's decades-long battle with stagnation.

💥 Why This Matters

* BOJ Normalization: On December 19, the Bank of Japan raised its key interest rate to a 30-year high of 0.75%. With inflation staying well above the 2% target for 44 consecutive months, markets are now pricing in a sustained tightening cycle toward 1.0% by mid-2026.

* The Carry Trade Bomb: Japan has been the world’s "cheap lender" for decades. As Japanese rates rise while U.S. and European rates fall or stabilize, the Yen Carry Trade (borrowing cheap yen to buy higher-yielding global assets) is facing a massive unwind. Analysts estimate roughly $500 billion in outstanding positions are now at risk.

* Liquidity & Volatility: Every 1% increase in Japanese yields can trigger massive capital repatriation. As Japanese investors pull money out of foreign bonds to bring it back home for higher domestic yields, global liquidity dries up, creating the "explosive volatility" we are seeing in high-beta assets like $ZBT and $ACT.

This isn't just another headline—it’s a fundamental repricing of global capital flows. The "era of free Japanese money" is effectively over, and the market is scrambling to adjust to this new reality during a week already thinned by holiday liquidity.