Japan's currency and bond market are cracking at the same time, and that's bad news for US stocks, bonds, and mortgage rates because so much global investment was funded by cheap Japanese money.

• The Japanese yen has fallen to its weakest level against the dollar in 40 years, while Japan's interest rates jump toward crisis levels.
• For decades investors borrowed yen at 0% and bought US stocks, bonds, and Bitcoin — the "carry trade" — pumping trillions into markets worldwide.
• Now Japan's rates are finally rising, so it's telling its giant pension and insurance funds to sell US assets and bring the money home.
• Japan is the biggest foreign holder of US debt, so as it stops buying (or starts selling), the US has to offer higher rates — pushing up mortgage costs here.
• Every past time the yen shot up fast (1998, 2008, 2020, 2024) something in global markets was blowing up — and this time a stronger yen is Japan's actual goal.

Outlook: If Japan succeeds in pulling its money home and strengthening the yen, expect higher US borrowing costs and a real risk of the carry trade unwinding and shaking global markets.