South China Morning Post (September 17)
“What is clear is that while the US is putting pressure on Japanese monetary policy, Japan could end up putting global markets under more strain.” Aside from undermining the Bank of Japan’s credibility, the outside pressure could “cause the yen carry trade… to unwind,” leaving especially exposed “technology-heavy stock markets such as South Korea and Taiwan.” Moreover the “higher Japanese bond yields could draw capital away from the US Treasury market, which is already under pressure because of the Fed’s hawkish pivot.”
Tags: BOJ, Bond yields, Carry trade, Clear, Credibility, Exposed, Fed, Global markets, Japan, Monetary policy, Pressure, South Korea, Strain, Taiwan, U.S., Undermining, Unwind, Yen
The Guardian (April 5)
This has become “a Japanese century – thanks to the yen’s role as easy money for global finance.” Thanks to “loose monetary policy” the yen has evolved “into the world’s cheapest and most reliable funding currency. By suppressing yields on public debt to keep Japan’s domestic economy afloat, the BoJ effectively created a publicly subsidised funding pipeline for bankers.” They can make a quick buck by borrowing cheaply in yen and investing in higher-return assets, such as US equities. The “yen carry trade” is enormous, with profits for global investors reckoned to run into tens of billions of dollars.”
Tags: Bankers, BOJ, Carry trade, Easy money, Economy, Equities, Funding currency, Global finance, Japanese century, Loose, Monetary policy, Public debt, Reliable, Suppressing, Yields
MarketWatch (January 26)
“The U.S. dollar took another hit on Monday, weakening to its lowest levels in four months, as talk of a coordinated intervention to prop up the competing Japanese yen intensified. A stronger Japanese currency could end up translating into trouble for U.S. stocks, as it did on Aug. 5, 2024, when a sharp unwinding of the yen carry trade was blamed for a selloff in global equities.”
Tags: Blamed, Carry trade, Coordinated intervention, Currency, Dollar, Japan, Prop up, Selloff, Stocks, U.S., Unwinding, Weakening, Yen
Barron’s (May 23)
“It’s time to worry about Japan and the yen carry trade again.” Rising yields in Japan could spell potential trouble in the U.S. The latest sale of Japan Government Bonds (JGBs) “was met with much less interest than anticipated,” selling at lower-than-expected prices and higher yields. “Those higher yields are trouble for the yen carry trade, which is a bad sign for U.S. Treasuries. Money borrowed in Japan often goes to buy U.S. debt, leading to a potential domino effect.”
Tags: Carry trade, Domino effect, Japan, JGBs, Prices, Rising yields, Treasuries. Debt, Trouble, U.S., Yen
Financial Times (August 7)
The equity sell-off in the U.S. “could have triggered the unwinding of the carry trade, not the other way around. And the timing suggests this is what happened. The equity sell-off did not start in earnest until Friday of last week — two days after the BoJ raised rates, or after currency traders had time to digest the news.”
Tags: BOJ, Carry trade, Currency traders, Equity, Rates, Sell-off, Triggered, U.S., Unwinding
Seeking Alpha (August 6)
The “market meltdown” on Monday “isn’t getting any less volatile, with things now moving in the opposite direction. Japan’s Nikkei ended the session up 10% overnight, marking its best session since 2008, following a plunge of 13% on Monday. Much of the volatility is said to have emanated in Japan, where a carry trade based on the yen went sour as the BOJ raised rates during the same week the Fed signaled its intention to cut.”
Tags: 2008, BOJ, Carry trade, Cut, Fed, Japan, Market, Meltdown, Nikkei, Plunge of 13%, Up 10%, Volatile, Yen
