Viewpoint: Japan's interest rate hike leads to a decline in US stocks, forcing arbitrage traders to sell assets to repay loans

ChainCatcher news, WhaleWire founder Jacob King posted on social media that the main reason for the sharp decline in stock futures is that yen arbitrage traders have to sell off assets, and this week could be very bloody.

Jacob explained that in August 2024, Japan raised interest rates from 0.1% to 0.25%, leading to a flash crash. Now, Japan has raised interest rates to 0.5%, with a 2-year yield of 0.71%. Japan's higher interest rates are ending yen arbitrage trading, where investors borrow cheap yen to invest in other assets. Now, borrowing costs are rising, which means they have to sell assets to repay loans.