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They went from -0.1% to 0.1% to 0.25% now. It may not seem like much, but the latter is a 2.5x increase, the former, well...

In any case it appears to have caused an unwinding of the yen based carry trade, i.e. borrowing in JPY and using it to purchase foreign stocks/bonds/etc. The unwinding leads to a stock sell off, and a lot of yen buying to settle those loans

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You beat me to it. The Yen buying will create a spiral, which will make the Yen rise even further.

On its own I don't think that the rate increases make the carry trade unprofitable. My guess is the large investors can see the potential of the spiral so have started to sell as early as possible before the yen appreciates too much, but in doing so have triggered it. Good for those that already got out, not so much for the rest.

Also possibly looking how aggressive the rate hikes by most central banks have been. So this might not be end so better get out early enough.

Would the fed doing an emergency cut also further exasperate the spiral as well since this would further devalue the dollar compared to Yen?

I don't think so, because it was already predicted to be likely that the US Fed would lower rates by the time Japan raised theirs. The jobs report from the US sealed it.

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