Yen Carry Trade Risks Increasing
The financial markets are on the edge of a deep abyss. A fall into that abyss may well be triggered by the massive unwinding of the Yen carry trade on world financial markets.
In it’s most basic terms the Yen carry trade is a transaction where borrowers borrow Yen at very low interest rates, convert Yen into other higher yielding currencies, and use the proceeds to purchase higher yielding assets.
The carry trade has worked well over the past several years as a weak Yen and extremely low rates of interest in Japan have been a given.
