There have not been many reasons to feel cheerful about how financial markets have behaved in recent weeks. One point of relief, however, might be found across in Japan.

Earlier this year, I – along with many other commentators – started ringing some alarm bells about the trend of the yen. The Japanese currency had weakened markedly over the past couple of years, partly because investors were borrowing in yen to invest in higher-yielding currencies and I feared that this pattern had become so extreme that at some point it would suddenly rebound, sparking some violent dislocations – of the type that last occurred back in 1998. But the good news, in a sense, is that I was wrong. In the last few weeks, the yen has indeed moved markedly: though it was trading around Y120 to the dollar a few weeks ago, it was just above Y107 earlier this week. This swing seems to reflect a significant unwinding of the carry trade, insofar as one can tell in this murky corner of capital flows.