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.
how we built this number — every step
The class rate is measured from our dated, sourced event library (decade-normalized Poisson — the full table is public at base_rates.json). The variant’s share within its class is the analyst’s editorial call, published so you can audit it. A wider range means thinner precedent. Full recipe: methodology · scored at Reality Check.
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 (gold) over time vs the crowd's (Polymarket, blue), 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. The gold path is an illustrative reconstruction anchored to today's estimate — real dated events, not a live re-estimate history.
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.
If it happens — the markets it would move
Biggest moves first. Projected moves are cascade-model priors; hist A–B% = what comparable past events actually did (measured abnormal returns), and model prior · unmeasured marks markets with no analogue backing yet. Tap any market for its price history.
| Market | Class | Projected move | |
|---|---|---|---|
| 1 | USD/JPY USDJPYon Hyperliquid 📈 chart | FX | ▼ -0.3% hist -0.38–+0.36% · other way +0.78% (n=12) |
| 2 | Aussie dollar AUD 📈 chart | FX | ▼ -0.3% hist -1.0–+0.19% · other way -1.4% (n=12) |
| 3 | Turkish lira TRY 📈 chart | FX | ▼ -0.2% hist -5.98–+1.71% · other way -0.51% (n=12) |
| 4 | Indian rupee INR 📈 chart | FX | ▼ -0.2% hist -0.6–+0.11% · other way -0.5% (n=12) |
Probable recommendation
Historical precedent — what analogous events actually did
Across 40 analogous events (overlap‑weighted), as abnormal returns — market beta stripped, so it's the event's own effect, not the market backdrop. Shown at 20 days (persistent) and 5 days (immediate); ↺ fades = the two horizons disagree. Confidence = consistency × sample × significance.
| Asset | History says | Abnormal (20d · 5d) | Hit | n | Confidence | vs cascade |
|---|---|---|---|---|---|---|
| TRY TRY | SHORT | -5.3% · 5d -0.6% | 62% | 32 | 0.24 | ✓ matches cascade |
| AUD AUD | SHORT | -0.8% · 5d -0.8% | 62% | 32 | 0.22 | ✓ matches cascade |
| High-yield credit HYG | SHORT | -0.2% · 5d -0.1% | 64% | 32 | 0.22 | · |
| INR INR | SHORT | -0.5% · 5d -0.1% | 60% | 32 | 0.18 | ✓ matches cascade |
| Bitcoin BTC | SHORT | -2.9% · 5d -3.6% | 61% | 30 | 0.15 | · |
| Volatility VIX | LONG | +2.2% · 5d -0.2% ↺ fades | 58% | 39 | 0.13 | · |
| 10y yield DGS10 | SHORT | -4bp · 5d 0bp | 51% | 40 | 0.01 | · |
| USDJPY USDJPY | LONG | +0.5% · 5d +0.1% | 47% | 37 | 0.00 | ⚠ differs |
| Gold XAU | SHORT | -0.6% · 5d -1.0% | 49% | 33 | 0.00 | · |
| US dollar DXY | LONG | +0.4% · 5d +0.4% | 46% | 40 | 0.00 | · |
Why this probability
BOJ already exiting NIRP/YCC; aggressive hikes path live but gradualism likely; 18mo. A base‑rate‑anchored prior, continuously scored against what actually happens — not a forecast.