What if the Bank of Japan ends yield-curve control and hikes hard?
Carry-unwind trigger: BOJ abandoning YCC and hiking hard strengthens the yen, forcing deleveraging of yen-funded carry — AUD and high-yield EM FX (TRY, INR) bleed as the funding leg appreciates. The direct rhyme is the Aug-2024 yen carry unwind, when USD/JPY collapsed and the Nikkei had its worst day since 1987. Transmission: Japan is the world's funding source, so a hawkish BOJ is a global de-leveraging event; forward angle — positioning is the swing factor, so the violence depends on how crowded the carry is when it breaks, not the size of the hike.
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The butterfly cascade
How this trigger trickles across markets, left → right — the root shock, its first‑order moves, then the ripple effects. Drag any node; tap a market for its real price history.
Resolution timeline — how this probability is moving
Our model's odds (electric blue) over time vs the market's (Polymarket, amber), from the past toward the 6–18 months horizon. Each dot is a real macro event that nudged the probability — green pushed it up, red pushed it down. Tap a dot for the source. Loading the probability audit trail…
What it would mean
If this plays out, it is a mixed shock. The Bank of Japan abandons yield-curve control and hikes aggressively. The trigger decomposes into signed root‑shocks — FX carry appetite ▼ — which propagate through our causal graph to the markets below.