Will Japan bring down the world economy? | The Economist (Level 1)

Japan and the United States have both acted to support the Japanese yen. The US Treasury Secretary bought between five and ten billion dollars of yen. This was the first US currency intervention in about thirty years. Japan has been trying for some time to stop its currency from falling. The yen is weak because interest rates in Japan have been very low for a long time. Low rates make it cheap to borrow yen, and investors use that money to buy higher-yielding assets in other countries. This is called the carry trade. Now Japan's interest rates are starting to rise, and that could cause problems. If the carry trade unwinds too quickly, global markets could fall. Some experts worry about this risk. Others say governments can act to prevent a crisis. The situation is risky, but it is not certain that a disaster will happen.