US Equity Futures Strength in Asian Trade: Weaker Yen and Falling Yields Ease Carry Trade Fears

This analysis is based on the FX Empire report [1] published on December 11, 2025, which highlighted US equity futures strength in Asian trade driven by a weaker yen and falling JGB/Treasury yields. A weaker yen (USD/JPY ~156 [2]) benefits US multinational corporations with Japanese operations via currency translation gains and may attract Japanese investor flows into US assets, supporting equity prices [1]. Falling 10-year JGB yields (~1.925% [2]) and US Treasury yields (~4.20% [2]) reduce the cost of yen-denominated borrowing, easing fears of sudden carry trade unwinding— a scenario that could disrupt global asset prices [1][2]. The recent Fed rate cut (December 10, 2025 [3]) and upcoming BoJ meeting (December 18-19, 2025 [4]) add policy context that may influence USD/JPY trends and global markets. Subsequent closing prices of major US indices reflect gains: Dow Jones (+1.29%), S&P 500 (+0.58%), and Nasdaq 100 (+0.34%) [0].

1. Interconnected Market Dynamics
   : The event underscores the interplay between currency markets (yen weakness), bond markets (falling yields), and equity markets (US futures/indices), highlighting how global asset flows are influenced by carry trade mechanics and yield differentials [0][1][2].
2. Policy Uncertainty as a Catalyst
   : The combination of the recent Fed rate cut and upcoming BoJ meeting introduces policy divergence risks that could alter USD/JPY trends and market sentiment in the near term [3][4].
3. Causal Attribution Gap
   : It remains unclear how much of the December 11 equity gains stem from yen weakness/yield falls versus the prior day’s Fed rate cut, necessitating further analysis to disentangle these factors [info gap].

1. BoJ Policy Shift
   : A hawkish turn (e.g., rate hike) at the December 18-19 BoJ meeting could strengthen the yen rapidly, reversing current USD/JPY trends and negatively impacting US equities [4].
2. Yield Reversals
   : Sharp rises in JGB or US Treasury yields could reignite carry trade unwinding fears, disrupting global asset prices [1][2].
3. Policy Divergence
   : Further Fed rate cuts or BoJ tightening could widen/narrow yield differentials, altering global asset flows and market stability [3][4].

• Short-Term Equity Support
  : Yen weakness and falling yields provide favorable conditions for US equities, particularly for multinationals with Japanese exposure, in the short term [1][2].

• Event
  : US equity futures (Dow Jones, Nasdaq 100) rose in Asian trade on December 11, 2025, driven by a weaker yen and falling JGB/Treasury yields [1].
• Data Points
  :
  • USD/JPY ~156 [2]
  • 10-year JGB yield ~1.925% [2]
  • 10-year US Treasury yield ~4.20% [2]
  • US index gains: Dow (+1.29%), S&P 500 (+0.58%), Nasdaq 100 (+0.34%) [0]
• Policy Context
  : Fed rate cut (December 10, 2025 [3]), BoJ meeting (December 18-19, 2025 [4])
• Critical Considerations
  : Investors should monitor upcoming BoJ policy signals and yield trends to assess potential market shifts.