First, I believe that the reversal of the overall structural Carry trade should meet two conditions.
The first is the expectation of a recession in the United States.
The second is the continuous interest rate hikes in Japan.

Because if the United States does not experience a recession, a yield of over 10% on U.S. stock indices, given the current interest rate levels in Japan, is not attractive enough to reverse capital flows. Therefore, these two preconditions are the basis for my judgment on whether a complete reversal of the carry trade occurs. They set the big direction. This is also the main reason why the market was able to recover after the previous rate hikes in Japan. (I do not believe that all three previous rate hikes led to the market decline solely due to carry trade, and I will elaborate on this gradually.)

Based on this, let's see whether this will be a complete reversal. I still don't think so. The employment data released yesterday, while not very good, does not indicate that the United States is about to fall into a recession. There are no obvious signs of recession in the U.S. 10-year Treasury bonds or the U.S. stock market, so I think condition one does not apply.
Of course, short-term market sentiment and price fluctuations may trigger deleveraging, but as long as the major direction does not reverse, the market can digest it.

Let's take a look at the first three interest rate hikes in Japan as shown in the chart.

The first was in March 2024, marking Japan's first interest rate hike since 2007. In addition to raising interest rates, the Bank of Japan also announced the cancellation of its Yield Curve Control (YCC) policy and stopped purchasing risk assets such as exchange-traded funds (ETFs). This is seen as a turning point for Japan's nearly 11-year 'ultra-loose monetary policy' beginning to normalize. The significance of this turning point outweighs the actual impact of the interest rate hike. At the same time, Bitcoin rose from 24,000 to 73,000 over a six-month period, so the market's pullback due to Japan's interest rate hike is completely acceptable.

The second time was on July 31, 2024, and on August 2, the unemployment rate data released by the U.S. triggered the Sam Rule. This time, the panic was caused by U.S. recession expectations coupled with another interest rate hike in Japan, which indeed triggered a deleveraging in carry trades. However, later it was also seen that the U.S. did not fall into recession, so the market recovered after the fluctuations, without a sustained major reversal in carry trades.

The third time was in January 2025, but in this chart, you see a decline of 31%, which was the lowest point in April. The most severe drop occurred in February and March; what happened then? The main reason for that drop was not carry trades, but rather Trump's tariffs creating a big pit in the market.

Therefore, if we have to attribute the previous three major declines in the chart to Japan's interest rate hikes, I personally believe that only the one in July last year was caused by U.S. recession expectations combined with Japan's interest rate hike.

So what will happen this time? I don't know, but I don't think there will be a U.S. recession this time, nor are there recession expectations like last July, and it's not just that Bitcoin has increased several times and now requires a pullback. At least I am not worried about the major direction; whether market sentiment will trigger major fluctuations is beyond my capability. I do not predict short-term fluctuations; I only manage risk and re-engagement based on condition triggers.