Remember last July and August when the yen carry trade blew up? At the time, the central bank surprised the market by signaling a faster pace of rate hikes than expected. Investors sold foreign currency, bought back yen and sent markets into a tailspin. The S&P 500 didn’t like it. In mid-July, the index was trading in the 5,600 area, then dumped about 400 points in a couple weeks.

We bring it up because Japan risk is again on the macro radar. The country’s 30-year bond yield jumped as high as 3.14% last week, up from about 2% around Halloween. Fortunately, a little sigh of relief has come; the Ministry of Finance signaled its intention to reduce issuance of longer-term bonds in favor of closer maturity obligations, sending the yield to 2.88%.

Unlike last summer, the risk now is not so much in the yen carry trade itself but in general macro stability, though the former is certainly on the radar. When you’re tracking markets and must internalize that the world’s second-largest debtor has a long bond yield that has jumped from under 1% in 2022 to around 3% in summer 2025, it calls into question a handful of optimistic themes. One of those has been the view that Japanese stocks offer so much appeal because bond yields in that country are paltry…or were paltry.

The volatility of it all is unsettling. Let’s get real: Japanese yields were going vertical until the Finance Ministry popped in. It makes you wonder if “sell in May and go away” becomes thematic in this month’s waning sessions, or in June.

At least there is good news on the trade front. Though China’s exports to the United States peaked a few years ago, the country’s general export machine continues to hum. Global exports rose 8.1% over the year through April. No doubt, that data is skewed by purchasing managers front-loading orders; Trump’s 90-day global tariff pause went into effect April 10. Logic dictates that people and companies placed orders in April’s final 20 days to get ahead of future duties.

In addition to the April-to-July global tariff pause, the U.S. and China are about two weeks into their own 90-day “tariff respite” window that lasts until August 12. Currently, the status quo has the US tariff rate on China equal to the 10% global baseline that Trump has set for all countries plus another 20% fentanyl penalty, or 30% in total. The peak was 145%. In turn, China’s rate on the U.S. is for the most part 10%.

Beyond the ructions in Japanese bonds and the tariff worries, a third risk is a sense of unease in US Treasuries due to the government’s credit rating downgrade and persistent budget deficits. After kissing 4.0% in early April, the 10-year Treasury Note yield has backed up to 4.48%. Some worry that a “5-handle,” or even the prospect of such, could spell trouble for stocks. For now, that worry is pure speculation. Consider the last sharp back-up in yields: the move from 3.64% on 9/16/2024 to 4.81% on 1/13/2025. The S&P 500 had no problem, returning 4.0% in that roughly 4-month window. Nevertheless, sometimes fears become a self-fulfilling prophecy. If we wake up one of these mornings and T-Notes are 4.7% or 4.8% or 4.9%, or wherever, the S&P just might hate it.

Still, corporate profits are sound, if not solid. It looks like the ink will dry on 13% growth in S&P 500 earnings for Q1. FactSet puts bottom-up S&P 500 earnings at $264.78 for 2025. But with the index at 5,882, up over 1,000 points from the 52-week low of 4,835 on April 7, that puts the market’s multiple at 22.2x current year earnings.

To sustain rich valuations, things need to go right in all three of the market’s focal-point areas: Japanese bonds, US bonds and trade negotiations. If even one of those three focal points don’t “play nice,” stocks could have a rough summer.