Falling Yen Puts Global Bond Markets on High Alert

Japan's struggling economy has led to a falling yen, its lowest level in almost 40 years. The currency has also weakened against other major currencies like the US dollar and pound.

The Bank of Japan's low interest rates have contributed to this issue. For nearly 25 years, interest rates were kept at or below 0%, until they rose to around 1% last year. This made borrowing cheap in Japan, allowing investors to lend money abroad and reap higher returns.

This 'yen carry trade' has led to a persistent selling of yen, further weakening its value. If Japanese interest rates rise or there's an abrupt change in the exchange rate, this trade becomes riskier, resulting in selling overseas investments and buying yen to pay back loans.