Why does every interest rate hike in the yen lead to a fall in global risk assets? The largest arbitrage business globally is yen arbitrage. For the past few decades, the yen has implemented zero interest rates or even negative interest rates, and global institutions have been taking advantage of the yen's low rates by borrowing yen to buy U.S. stocks or other risky investments to profit from the interest rate spread. So as soon as the yen raises interest rates, borrowing costs increase, the interest rate spread disappears, and institutions are forced to sell risk assets to repay their yen loans, causing global risk assets to fall.