Super Central Bank Week Kicks Off: BOJ Rate Hike Odds Top 70%, Carry Trade Unwinding Risks Mount - finance.biggo.com

A dense stretch of central bank decisions is underway, with the Bank of Japan drawing particular attention. Market-implied odds of a BOJ rate hike have climbed above 70%, according to the source report, a notable shift for a central bank that spent years anchored near zero.

The relevance extends well beyond Japan. Higher Japanese rates can narrow the interest-rate gap that has long made the yen a preferred funding currency for carry trades — strategies that borrow cheaply in yen and invest in higher-yielding assets elsewhere. If that gap compresses, those positions can become costlier to hold, and a broad unwinding could ripple across global markets, from currencies to equities and bonds.

What to watch: the BOJ's actual decision and its guidance on the pace of further moves, alongside policy signals from other major central banks meeting this week. The yen's reaction and cross-asset volatility may offer the clearest read on whether carry-trade positioning is genuinely shifting.