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Freefalling yen a soaring global risk

TOKYO – Could the Japanese yen’s 12% decline this year be an even bigger threat to global markets than inflation, Federal Reserve tightening and war in Ukraine?

A month ago, this question might have elicited eye-rolling and guffawing. Now, no one is laughing at the risk of the third-most-traded currency plummeting from the grasp of Tokyo officials notorious for micromanaging exchange rates.

For this, there are two decidedly sober explanations.

First, few events wreck a hedge fund’s year faster than a sudden about-face in the yen. From the late 1990s to the early 2000s to the 2008-09 global crisis, there are myriad well-documented examples of sharp yen moves devastating markets.