Apollo Global Management says the yen’s long-standing correlation with US-Japan rate differentials collapsed following April 2 tariffs.
The Japanese yen’s decades-long tie to US-Japan interest rate gaps has ended, according to Apollo Global Management. The firm’s chief economist said the yen carry trade broke down after April 2, 2025, when US tariffs triggered volatility and erased profitability.
Historically, traders borrowed yen at near-zero rates to buy higher-yielding dollar assets, pushing the yen lower as the rate gap widened. Apollo’s data showed the correlation held until April 2025, when sharp yen rallies wiped out carry trade returns despite a persistent rate differential.
Japan’s debt dynamics now drive the currency, Apollo said. The Bank of Japan held rates at 1% in July, with one dissenting vote calling for 1.25%, further pressuring carry trade margins. US 10-year Treasury yields stood at 4.64% on August 6.