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$SPDR S&P 500 ETF (SPY.US)$ The market's recent downturn has left many investors feeling uneasy, especially after weak earnings and job numbers were released. But there's more to the story that's influencing global markets right now.

For those unfamiliar, the Japan carry trade involves borrowing yen at low interest rates to invest in higher-yielding assets abroad. This strategy works well when Japanese rates are low, keeping borrowing costs cheap.

However, when the Bank of Japan (BOJ) raises rates due to inflation, it prompts investors to sell off their foreign investments to repay their yen loans, causing a global selloff in stocks.