Japan Just Sent A Warning To The U.S. Stock Market (How To Prepare)

Something just broke in the Japanese bond market. And if you're an investor in the United States, you want to pay attention. Japan's 30-year bonds just broke their all-time record high. Now, I know what you're thinking. How does Japan's bond market impact the United States stock market? Let me show you. It's through a little understood concept called the yen carry trade, which has been funneling hundreds of billions of dollars from the Japanese economy and all depended on the bond market in Japan. This yen carry trade has helped the United States stock market reach brand new record highs, but it only works when bond rates in Japan are low. Right now, bond rates in Japan aren't just high, they're the highest that they've ever been in history. That means there will be less dollars coming from the Japanese economy into the United States stock market, which can have a direct impact on our stock market and our economy, which is why you want to pay attention to this. And in this video, I'm going to break down what's happening, what it means, and how it can also create opportunity. So make sure you stick with me until the end of this video. This is also why on June 16th, I'm hosting a live, free, and virtual investor workshop at 12 p.m. Eastern time, noon, where I'm going to be going over number one, how our economy is changing, and number two, how these changes create new and better investment opportunities. So if you're an investor and you want to see how you can invest your money better in 2026 and where the opportunities are, I invite you to join me for free. When you sign up, you're also going to get access to Market Briefs, which is my newsletter for investors. And as an added bonus, when you actually show up live on the workshop on June 16th at 12 p.m. Eastern time, noon, you're going to get a free digital copy of this book, How Money Changed Forever, for free, that my company wrote. So if you are an investor, you want to see how you I invite you to join me on June 16th at 12 p.m. Eastern time, noon. I have that link for you down in the description below. Let me start by explaining how the yen carry trade actually works, that way you can get a better understanding of what might be coming in the United States economy and stock market. For decades, the Bank of Japan, which is the central bank in Japan, didn't just keep low interest rates, they kept negative interest rates. Now, this concept of The way that positive interest rates works, this is what we're all used to, is you go out and you borrow, let's just say $1,000, and now you have to pay this money back plus interest. So over the course of the loan, you pay back $1,100. You paid the $1,000 in principal plus the $100 in interest. Negative interest rates are a little bit different. With negative interest rates, you go out and you borrow that same $1,000, but now instead of paying back the $1,000 plus interest, instead what you do is you're going to pay back $900 over the course of the loan. Now, when you hear that, you're probably thinking, why in the world would any bank or institution lend money at a negative interest rate? Because you're going to lose money. In Japan, there were two reasons why the Bank of Japan set these negative interest rates. Reason number one is that Japan's economy was facing a deflation problem, not an inflation problem, a deflation problem, which means the prices of things were falling, which at first sounds good because that means your $100 can buy you more stuff year after year. But the downfall with that was people's wages also fell, so wealth was also falling. So to fight deflation, the central bank, the Bank of Japan, had negative interest rates to encourage the government to stimulate and spend money that it didn't have. And reason number two why the Bank of Japan would set negative interest rates is because it doesn't care about the rate of return. It is the central bank of Japan. It's not a person like you or me or an investment institution that wants to grow our money. It's just there to help stimulate and facilitate whatever needs to be done for the How can we do that? Let's cut interest rates. Cutting interest rates is not enough. Let's make negative interest rates. Let's make borrowing money for the Japanese government cheaper than free, meaning you're essentially getting paid to borrow money. That way, the Japanese government will continue to go deeper into debt to create more of this money and to keep stimulating the economy to hopefully create more inflation and to get the economy booming again and to create more wealth in our country. But besides the country of Japan, do you know who else likes this idea of free money? Wall Street. So now you understand that the Bank of Japan set these negative interest rates which allowed the government of Japan to borrow money for free. That way, the government could continue to spend money it didn't have. But what this also did is it created an economic environment in the Japanese economy where interest rates are essentially 0% everywhere because the government wanted people to borrow money and spend money to stimulate the economy. Well, that was when banks on Wall Street said, oh, take a look at this. We can borrow money in Japan for essentially free. What happens if we borrow this yen in Japan, we convert it to the United States dollar, and then we take this dollar and we invest it into the United States stock market. If we can borrow this money at, let's just say, 0% interest, 1% interest, or extremely low interest rates, it's worth it for us to go to a different company, borrow this money, this yen for essentially free, and I'll take this millions of dollars, billions of dollars, hundreds of billions of dollars, and dump it into United States assets. Even if you put it into United States treasuries that are earning three, four, five percent, it's free money. Why would we not do that? And so we saw these banks on Wall Street that were taking huge sums of money from the Japanese economy, converting it to dollars, and then taking that money, investing into United States treasuries, United States real estate, and United States stocks to the tune of hundreds of billions of dollars. This, for a number of years, created a win-win-win situation because on one hand, the Japanese banks were happy because they were able to issue these big loans. Wall Street was because they could borrow money for free and make huge returns on free money, and the stock market boomed because now hundreds of billions of dollars, some estimates say trillions of dollars, were entering the stock market. And if we think about supply and demand, when you have more buyers than sellers, meaning more dollars coming into the stock market, that helps raise the stock market, which means it helped your 401k, it helped your investment portfolio, it helped people build more wealth in the United States because more money was coming into the United States stock market, but now things are changing. Remember what I said a minute ago? The reason why the Bank of Japan had these negative interest rates was because they wanted to fight deflation. They had a deflation problem. Well, now that has changed. Now the problem is inflation and their currency, the yen, is weakening. It might not seem all that surprising, but the Japanese economy became so used to these negative interest rates that they thought inflation would never come, but it's here today. But then things got even more weird in 2024 when the Bank of Japan, for the first time in many years, changed their interest rate policy from a negative interest rate to a positive interest rate. That was the first interest rate hike that Japan had seen in 17 years. But then things really started to change in 2026 because in May of 2026, not only did Japan get the report that inflation numbers have now stayed above their target for over two years, but at the same time their economy is slowing down and is not growing faster despite the inflation. And then the icing on the cake is the bond yields in Japan. The interest rate now that the Japanese government has to pay to borrow money have risen, and they've risen not to the highest levels in five years or 10 years or 20 years or 30 years, but to the highest levels the Japanese government has seen in history, period. Now part of the reason for these higher bond yields is new economic policy in Japan because the Prime Minister of Japan wants to continue spending and borrowing money, and so now investors are saying we need a real rate of return to justify lending money to the government of Japan, which is why interest rates keep going up. But this is where policies are changing, the economy is changing, the bond market is changing, and this yen carry trade is not what it used to be. See this yen carry trade only worked when interest rates were extremely low or negative because that meant that you could go to a different country and borrow their currency, the yen, for essentially free, then you could pay the cost to get that currency converted to United States dollars, and then you could take that money and invest it into United States assets, and still because that money is so cheap you would make money because even if the money grew by a you were getting huge returns because it's off of money that's not even yours. But now as interest rates have gone up significantly in Japan, where now borrowing has a real cost to it, you have to pay a real rate of interest to borrow that money, it's not as profitable to continue borrowing money from Japan and then putting that money into the United States stock market, which is why this yen carry trade has broken, which means less money is coming from the Japanese economy into the United States stock market, which means Wall Street has access to less money to be able to continue dumping into the stock market, which means this pocket of money which kept coming into the United States stock market no longer exists. Now this is where a lot of people have predictions as to what's going to happen to the stock market, that it could really harm the stock market or do something to the stock market, but the thing that I want you to remember is that what this means is that if there's less money coming from Japan into the stock market, it means there's less buyers, not necessarily a huge surge of sellers, but a less flow of buyers into the stock market. But now that you understand how the Japanese economy is changing, let's talk about where the opportunities are and how they're changing with this change with the yen carry trade. Again this is one of the reasons why I'm hosting my live investor workshop on June 16th at 12 p.m eastern time noon. If you haven't registered for it yet, I have that link for you down in the description. Option one is more of the defensive side. If you think that this yen carry trade not working the way that it did is going to cause some pain to the stock market, well then you can still invest in the stock market in more of the defensive investments which generally do less bad when markets go down. Let me go over a few examples. Example number one would be investing for dividends. A dividend is when a company has a big profit and then at the end of the year, instead of just taking that money and reinvesting it, they just give it away to the shareholders. The idea is you're investing in a company that has steady profits that has the ability to give away big sums of money and you can invest into funds like ETFs which give you exposure to these dividend paying companies. An ETF is just a basket of stocks. It's a fancy way of saying that. Well one example of these funds is SCHD. As a disclosure, I'm personally invested in SCHD and the reason why now this great opportunity is because when people get worried about the markets, then they generally look for safer investments and a company that has big profits is considered a safer investment and SCHD is focused in on investing in companies that are not only working to pay out dividends but have been regularly increasing the dividends year after year. So if you want to get exposure to a group of companies that have strong profits and have been working to grow their profits and their dividends, this is the fund that gives you exposure to that. An alternative would be to invest your money into something called consumer staples. Consumer staples are the things that people buy whether you are in a recession or an economic boom. These are things like your toilet paper, your soap, your toothpaste, your coca-cola. These are the things that people buy regardless of what type of economy that you are in and you can invest into these types of consumer staple companies again with an ETF, a fund that's going to give you exposure to a broad basket of these types of companies that are selling the products that people need in every different type of economy and an ETF like XLP can give you exposure to that. The third one is something that gives you exposure to utilities because kind of like the other two, people continue to spend money on their utilities regardless of what type of economy that you're in and ETFs like XLU can give you exposure to utilities. Now, I got to remind you that I'm not here to tell you what to invest in. My goal is just to help you start thinking like an investor. There are many different things that you can invest in. There are so many different ETFs out there. My goal is just to show you the examples that way you can start thinking like an investor, not tell you that you need to buy these things because number one, investing has risks and number two, I'm not a financial advisor which is why you need to always do your own due diligence and never blindly trust a random guy on YouTube. Option number two is you can say, you know what, I like what Japan is doing. I like that they finally have positive interest rates. I like where the economy is going. I think they're going to turn it around. I want to invest in the Japanese economy because I believe that the Japanese economy is now finally going to see more growth and their markets are going to see more growth. Well, there are funds, again, ETFs that can give you exposure to the Japanese economy even if you're sitting in the United States. Let me go over some examples. Example number one is EWJ. This is an ETF that's going to give you broad exposure to the Japanese economy and the Japanese stock market. If you believe that the Japanese stock market is going to grow, EWJ is going to go up as the Japanese stock market goes up. If the Japanese stock market goes down, this ETF would go down as well. An alternative would be something like DXJ. This is an ETF giving exposure to the Japanese economy but it's a little bit more sophisticated. This is giving you exposure to a hedged equity ETF, meaning this is currency hedged. What that means is if the yen is strengthening against the dollar, this ETF removes that currency drag. That way you can see the stock upside without losing in the foreign exchange market, meaning the currency exchange. Then example number three that I'm going to talk about is the I'm not sure what to do or what's going on. I'm going to go over just a couple different examples. If you're concerned about the dollar and inflation, then a big hedge against the dollar that people like to go to is gold. Now, the thing that I want to remind you is that gold prices don't always go up. Gold prices generally go up. People are concerned about inflation. They're concerned about the dollar. They're about something bad happening. It doesn't always go up. You can buy the physical gold or if you want to just buy a fund, an ETF that gives you exposure to that physical gold, GLD is an example of that. If you say I want to just earn some interest while I wait and see what happens in the economy, then a way that you can earn some interest outside of just your bank would be to put your money into an ETF that gives you exposure to treasuries. Treasuries are loans made to the government. You can get exposure to these treasuries by investing in a fund that is giving exposure to these treasuries. Now, the goal with investing in a treasury ETF is not to see the value of your fund grow. That's not what's going to happen. The value of the fund is going to stay the same. The goal is to earn interest on that fund because now you're generating interest by lending your money to the United States government. Without actually lending it to the government, you're just buying a fund that you can sell like you would sell any stock in the stock market. One way to do that is SGOV. At the time of recording this video, SGOV is paying somewhere between the 3% to 4% a year in interest as you're just kind of waiting and seeing what you want to do. Again, not a good way to build wealth, but if you have some extra money and just wanted to wait, that is one option. The advantage with something like a treasury bond ETF is that you don't have to pay state or local taxes as well. What we talked about in this video is that we are seeing a change in the Japanese bond market and that can impact the United States stock market. What is the big change? The change is that bond yields, the 30-year bond yield in Japan has broken a brand new record high. But why is that happening and why is that going to impact the stock market? Well, the reason why it's going to impact the stock market first is because of something called the yen carry trade. This has been happening for now many years. And the way that it works is that in the Japanese economy, we had seen negative interest rates, which means that banks could go to Japan and borrow money for essentially free. And now you take this yen, you convert it to the United States dollar, and then you buy United States assets. And if the stock market is growing by 5, 6, 10, 15 percent, well now you've got a bunch of free money because you got to borrow this money for free and dump it all into the stock market and all that margin is yours. And this was happening to the tune of hundreds of billions of dollars, some people say trillions of depending on which metric that you use. Well, this yen carry trade only works if interest rates in Japan are low. And it was one of the reasons why the stock market kept booming because there was so much new money coming into the stock market because huge institutions are borrowing huge sums of money and dumping it into the markets, which helped people's 401ks and their general investment portfolios rise. But now things are changing because interest rates in Japan are because now Japan is facing an inflation problem, not a deflation problem. And now to fight this inflation problem, the Bank of Japan is working to raise interest rates. And while that's happening, the government of Japan is continuing to spend money it doesn't have, which is why the bond yields in Japan have been rising. And now they are the highest levels that Japan has seen in history, which means that the yen carry trade doesn't work the way it used to because you can't And so now that the free money is gone, there's less money coming into the United States stock market from the yen carry trade because it is more expensive to borrow money from Japan. And so now the question is, what's that going to do to the stock market? Some people are very fearsome. Some people say it's not going to make any difference. In any case, it can also create opportunities depending on how you want to invest your money. Again, I'm not here to tell you what to invest in. I'm here to help you start thinking like an investor. Again, on June 16th, I'm a going deeper into specific opportunities, so I invite you to join me then. But what I talked about is number one, if you're concerned about the United States economy, the value of defensive investments. This would be ways to invest your money to things that have less downside risk, not that they don't go down, but they generally go down less when you have market downturns. So we talked about investing for dividends, investing in consumer staples, investing in utilities. Then we talked about if you believe that the Japanese economy now is an investable opportunity because of where their economy is going, because of new changes in their economy, because of new changes in economic policy. We talked about different ways to invest in the Japanese economy. And then we talked about the wait and see. I'm not really sure. We talked about the value of gold in certain people's portfolios. And then we talked about investing in treasuries as a way to earn interest while you wait. If you got value out of this video, the best thank you is a referral. So if you could, please share this video with a friend, family member, colleague, or fellow investor. That way we can continue to spread this type President Trump is now unleashing the biggest AI push the world has ever seen. In plain English, that means hundreds of billions of your tax dollars are going