Global Market Selloff: Nikkei Plunges 12%, Yen Carry Trade Unwinds

A global market selloff dubbed 'Black Monday II' unfolded as the Bank of Japan's July 31 rate hike triggered a violent unwind of the yen carry trade — investors who had borrowed cheap yen to invest in higher-yielding assets were forced to close positions. The Nikkei 225 fell 12% in a single session, the S&P 500 dropped ~3%, and volatility spiked sharply. The episode highlighted how BOJ normalization could destabilize global capital flows.