Topic
Borrowing in low-yielding yen to fund higher-yielding assets, and the risk premium attached to that funding leg.
Japan's 10-year bond yield hit 3.075%, its highest since 1996, after the Bank of Japan raised its policy rate to 1.25%. BlackRock's scenario for money shifting home from Treasuries puts it at $55 billion, 5% of Japan's $1.1 trillion holding.
Reality
The Bank of Japan's policy rate is now the highest since 1995, two of nine votes went against it, and the currency Washington spent last summer buying weakened anyway. The vote split is the number to watch.
Reality
Polls put a 25 basis point move to 1.25% at 88% to 97%, and speculators have already flipped net long the yen. According to cryptobriefing.com, further strength now needs a BOJ surprise or a Fed cut.
Reality
The Fed decides on the 16th and the Bank of Japan on the 18th, and the gap between a 3.625 percent midpoint and a Japanese rate just above 1 percent is what a yen-funded dollar position collects until they do.
Reality
Koichi Sugisaki's team wants clients long dollar-yen from about 154 toward 163 with a stop at 150. That pays 2.25 for every 1 risked on a view that the yen's rally was mechanical positioning that has now flushed out.
Reality
The case that the yen carry trade is unwinding rests on one named asset manager's report, relayed by Bloomberg, and on a single month of price action in a currency that has already given part of it back.
Reality
A hawkish Bank of Japan board member and talk of GPIF repatriation moved the yen 3.2% in two days, but the 16 trillion to 17 trillion yen short book JPMorgan describes has not been forced to cover anything yet.
Reality
Roughly $87 billion of yen buying, funded by a repo against Japan's own bond holdings, is being asked to steady a carry trade that estimates put between $500 billion and $4 trillion, and Yves Smith expects it to hold briefly.
Reality
Traders put a September BOJ hike at 80 to 90 percent, the yen sits four yen off its summer low of 164, and the US Treasury Secretary is telling Tokyo to let Abenomics end by itself rather than defend it.
Reality
Ministry of Finance flow data show a bid under global stocks and bonds funded by yen carry, and repriced in July by one minister's suggestion about GPIF.
Reality
The Bank of Japan held at 1% after raising from 0.75% in June. With 2.5% inflation projected against 0.6% growth, its own forecast says the tightening is not finished.
Reality
The first joint US-Japan yen intervention in three decades moved the rate about seven yen and handed much of it back, leaving the carry trade as the live risk.
Reality
Leveraged funds cut net yen shorts from nearly 138,000 contracts to about 59,500 in roughly five weeks. The carry trade's risk premium has been re-priced by policy, not by rates.
Reality