A collapsing Japanese yen is bad news for global markets, because the tools Japan has left to save its currency could trigger a sell-off in stocks and bonds worldwide.

• The yen has dropped 13% against the dollar in a year, making food and energy painfully expensive for ordinary Japanese people.
• US inflation is still stuck around 4%, and Fed pick Kevin Warsh is signaling rate hikes could come at any meeting with no warning.
• Higher US rates pull money toward the dollar and away from the yen, and Japan's currency interventions keep failing to stop the slide.
• Japan's only real fixes — dumping US Treasuries or hiking rates hard — could unwind the "carry trade" and force a flood of Japanese money out of US stocks and bonds.
• Japan also relies on China for rare earths and imports, but a fresh China blacklist of Japanese firms is making inputs scarcer and costlier.

Outlook: Expect the yen to keep falling until Japan is forced into aggressive rate hikes or reserve sales — the moment that could crack global markets.