The plaster seems to have stopped falling from the ceiling, for now at least. Relative calm seems to have been restored after a turbulent few days for global share markets. Talk of routs, crashes and turmoil already starts to look a bit overdone.

But is the narrative about what triggered this sell-off correct? Most of the commentary has focused on the US and a key set of jobs figures released in Washington on Friday. These, it has been widely claimed, sparked fears of a US recession, which then spooked markets around the world.

It’s an interpretation that the world’s securities traders and investment bankers would rather like to be true. The more pressure they can put on the US Federal Reserve to loosen policy as far and as quickly as possible, the happier they will be.

• US jobs data increases expectations of interest rate cut

Not enough focus has been on what happened in Tokyo two days earlier, on Wednesday. This was when the Bank of Japan lifted its base interest rate from a range of 0-0.1 per cent to 0.25 per cent. This merited little more than a small story in the financial pages at the time.

Japan may still be the fourth biggest economy in the world but it does not get the attention it once did. It’s increasingly regarded as a sleepy curiosity and a policy outlier, a nation whose weird demographics and deflationary pressures set it apart from the rest of the world.

But that rate rise was remarkable. First, it was only the second tightening of policy in 17 years. Second, it was a surprise: just a third of analysts had predicted it. Third, it was accompanied by eye-catching remarks from the central bank’s governor, Kazuo Ueda, that he wanted to push up rates still further in future.

The yen soared, of course. It had already been on a tear in the previous few days and Ueda’s comments gave it fresh wings. In the space of three weeks to Monday it ended up strengthening from 161 yen to the dollar to 145 yen.

That had two big effects. It suddenly made prospects for Japan’s big exporters significantly less promising, but more immediately it triggered a crisis for hedge funds and other investors which for years have been able to borrow yen super-cheaply to invest in higher-yielding assets both domestically and in the rest of the world — a gambit known as the carry trade.

Higher borrowing costs and that resurgent yen seem to have sparked a scramble to unwind those trades, with investors forced both to unload assets whatever the price and then convert the proceeds back to yen, again whatever the price. Margin calls on what were in effect leveraged bets then amplified the stampede.

“You can’t unwind the biggest carry trade the world has ever seen without breaking a few heads,” was the verdict of Kit Juckes, chief currency strategist at Société Générale.

This, therefore, was a Japan-centred sell-off, not a US-focused one, though the US data may certainly have exacerbated things. Over the space of two trading days on Friday and Monday, the Nikkei 225 index was down by a thumping 17.5 per cent. The more broadly based Topix slumped by 17.8 per cent.

Those were far bigger dives than in the US, where the S&P 500 dropped by a relatively modest 4.8 per cent over the same two trading days. Or the UK, where the FTSE 100 was down by a mere 3.3 per cent.

• Stock market jitters as global sell-off gathered pace — as it happened

Those US employment numbers were downbeat, with only a net 114,000 new jobs created. That was lower than the typical run rate of 180,000 a month for the past ten years, but it was still net employment creation and it was only one month’s numbers. US growth has if anything been picking up, from an annualised 1.4 per cent in the first quarter of 2024 to 2.8 per cent in the second quarter.

The warnings expressed about a possible recession therefore seem very exaggerated, though a modest slowdown is likely. Expansionary fiscal policy in the US should keep the economy moving, even if it may slow from a canter to a trot.

Some of the more excitable investors, however, have seized on the figure to insist that the Fed must move quickly to cut rates, some talking about a larger than expected half-point cut next month or even an emergency reduction outside the normal meeting timetable.

It’s a new version of the so-called tapering tantrums of ten years ago, the name given to the tendency for Wall Street to have a fit of vapours whenever the Fed suggested it might start to reduce or “taper” the size of the gigantic monetary injections into the system.

Perhaps this version is more of a sulk than a tantrum. Traders and economists have been predicting the first loosening of US monetary policy for months now, but the Fed has not budged. That’s not unreasonable, given that US inflation is still above target while unemployment remains low.

The Bank of Japan has already moved to placate the Japanese markets. Its deputy governor Shinichi Uchida declared yesterday that it would not raise its policy rate any more while markets remained unstable. The Nikkei has now recovered by 11.6 per cent from its Monday nadir.

It is not the job of central bankers to protect share traders from nasty losses. The Fed must not let itself be “bullied” by the markets, Mohamed El-Erian, the former Pimco boss, has rightly said.

It is their job, however, to investigate and mitigate sources of financial instability. The yen carry trade seems to have been just that, though no one has much idea how widespread it has been or how much has already been unwound in the past few days.

The Bank of England in its latest financial stability report didn’t mention it at all, though it did warn vaguely about “further signs of hedge fund leverage”. It’s the inevitable curse of policymakers to be wrongfooted by the risks they don’t spot rather than those they do.

One other point: Japan is still the world’s second biggest share market after the US, accounting for 5.9 per cent of the MSCI World Index. The UK weighting is 3.8 per cent. For anyone with a low-cost passively managed pension pot (which is most of us), what happens to Japanese shares may well be more important than what happens to British ones.

Patrick Hosking is Financial Editor of The Times