Japan's $4 trillion 'carry trade' is beginning to unwind as investors shift their focus from overseas assets to domestic bonds. This shift is driven by the narrowing gap between Japan's ultra-low interest rates and those of other countries. Japanese investors, who have long benefited from low interest rates at home to fund purchases abroad, are now favoring domestic bonds over foreign debt. In the first eight months of the year, Japanese investors snapped up a net ¥28 trillion ($192 billion) of the nation’s bonds. This trend is expected to result in a sustained, gradual flow of capital back into Japan. The Bank of Japan's massive bond-buying spree has also contributed to a shortage of paper in the $9 trillion bond market, causing potential disruptions.