The yen-carry unwind: August 2024's global volatility shock

On 5 August 2024, Japan's Nikkei 225 fell more than 12% in a single session — its worst one-day fall since 1987 — as leveraged positions funded in cheap yen were unwound at speed. Equity volatility spiked globally and US index futures opened sharply lower before markets stabilised over the following days.

At the time, the Bank of Japan had just raised rates in late July while a weak US jobs report had revived US slowdown worries. Traders knew enormous carry positions existed, but their size and the speed of forced unwinding only became apparent as the selloff unfolded.

Japanese equities fell double digits in one session, the yen strengthened sharply, volatility gauges spiked to levels rarely seen outside crises, and risk assets worldwide traded lower before recovering much of the fall within days.

Whether the unwind marked the start of a broader deleveraging cycle or a positioning flush; how much carry exposure remained; and whether the US economy was genuinely rolling over.

Markets recovered faster than many expected, and the episode became the reference case for how positioning — not news alone — can produce outsized single-day moves. Carry-trade exposure is now a standard question whenever the yen moves abruptly.

It is the clearest recent example of a session where the honest answer to "why did markets move?" involved leverage and positioning rather than a single headline — exactly the distinction our typed causal-confidence labels exist to preserve.