The weak yen is influencing global stock prices and posing a threat to stability in the real economy, as international capital flows remain footloose. The Japanese currency is expected to remain weak for the foreseeable future, despite recent official intervention in foreign exchange markets by Japan and the United States, so the risk of a bursting of the “bubble economy” is likely to intensify. The boom in artificial intelligence (AI) stocks is one factor, but leveraged, yen-financed speculation in stocks is another important but hidden one. As Naomi Fink, chief global strategist at Amova Asset Management in Tokyo, put it, the yen is “carrying the weight of the world’s risk tolerance”. The yen-funded carry trade, where investors borrow cheaply in yen to invest in higher-yielding assets, is supporting long-duration risk assets, and Fink suggested that “the currency may remain undervalued until risk appetite, global liquidity conditions or Japanese capital flows begin to shift”. Financial markets in general are heavily reliant on the weak yen-induced boom, which is being funded to a large extent by massive borrowing by individuals to finance investment in stocks and bonds. If interest rates continue to rise, the vulnerability to severe correction of such borrowing will only increase.