On Tuesday, Japan’s benchmark Nikkei 225 index soared nearly 11%, only a day after it set markets on a downward trajectory in both Europe and on Wall Street. The Japanese index advanced more than 3,300 points, not quite making up for the huge loss of more than 4,400 points the day before, when it plunged 12.4% in its worst single-day decline since 1987 — Black Monday.

In Tokyo, the Nikkei was down 12%. In Seoul, the Kospi sank 9%. When the opening bell rang in New York, the Nasdaq cratered 6% in seconds. The Dow Jones Industrial Average took a 1,033 point hit. The S&P 500 dropped 3%. Cryptocurrencies sank. The VIX, a gauge of stock market volatility, skyrocketed. Investors piled into Treasury bonds, a reactionary impulse towards the safest asset of them all.

One major cause the losses are carry trades and, furthermore, the excessive speculation spurred by monetary arbitration. Essentially, when engaging in a carry trade, an investor borrows in a low-interest-rate currency (funding currency) and invests in a high-interest-rate currency (target currency). The risk of carry trades are losses based on the contingency of an unforeseen change in exchange rate against an investor’s domestic currency that minimizes returns of a given investment when converted back into the investor’s domestic currency.

The BOJ (Bank of Japan) ended its negative interest rate policy in March and the lynchpin of hope in the US economy was thwarted by the most recent U.S. Bureau of Labor Statistics from August 2 indicating an almost 1% unemployment rate jump domestically.

“You can’t unwind the biggest carry trade the world has ever seen without breaking a few heads. That is the impression markets give us this morning,” Kit Juckes, chief foreign exchange strategist at Societe Generale, said in a research note published Monday.

The Japanese currency has risen sharply against the U.S. dollar in recent weeks, trading at 143.36 per dollar at 4:35 PM London time on Monday. It marks a stark contrast from the run-up to the July 4th U.S. holiday, when the yen fell to 161.96 per dollar for the first time since December 1986. Volatility rooted in Japan’s new monetary tightening and an acute response to perceived speculative losses in a downturned economy.

However, JPMorgan analysts see a potential “buy the dip” opportunity as the rotation out of tech stocks might be nearing its end. 

“Overall, we think we’re getting close to a tactical opportunity to buy the dip and our Tactical Positioning Monitor could dip further in the next few days,” wrote wrote John Schlegel, JPMorgan’s head of positioning intelligence. “That said, whether we get a strong bounce or not could depend on future macro data.” The strength of any rebound depends on future macroeconomic data, including ISM manufacturing, CPI, and retail sales.