{"id":199549,"date":"2007-07-16T23:56:00","date_gmt":"2007-07-17T04:56:00","guid":{"rendered":"https:\/\/www.panix.com\/~msaroff\/40years\/2007\/07\/16\/and-then-there-is-the-yen-carry-trade\/"},"modified":"2007-07-16T23:56:00","modified_gmt":"2007-07-17T04:56:00","slug":"and-then-there-is-the-yen-carry-trade","status":"publish","type":"post","link":"https:\/\/www.panix.com\/~msaroff\/40years\/2007\/07\/16\/and-then-there-is-the-yen-carry-trade\/","title":{"rendered":"And Then There is The Yen Carry Trade"},"content":{"rendered":"

While I have talked about currencies, it has primarily been about the fall of the dollar relative to the Euro. A more significant risk in the short term is a strengthening Yen.<\/p>\n

Much of the current investment mania has been driven by the Yen carry trade<\/a>.<\/p>\n

Basically, Japan has the lowest interest rates in the industrialized world, so if one borrows money in Yen, and invests them in another country.<\/p>\n

The Japanese interest rates are currently arounc 0.5% (no, I did not<\/span> misplace a decimal point), so you could invest in the US at around 4-5%, and pocket the difference.<\/p>\n

The rates are low because of the long Japanese recession, and deflation, starting in the early 1990s.<\/p>\n

The carry trade is not risk free. If the Yen strengthens versus the Dollar, then you have to pay back more dollars, and you can end up losing money.<\/p>\n

Japan appears to be finally over its 15 year downturn, it’s economy “grew at a 3.3 percent annual rate in the first quarter”, so it’s likely that the central bank will raise rates, which will bolster the Yen generally.<\/p>\n

In any case a rate of 0.5% is simply not sustainable, so it has to go up, and the currency can be expected to go up then too.<\/p>\n

So, in addition to the private equity binge, sub prime mortgage securities, exotic mortgages generally, and an IPO boom, we have another potential for a collapse with the Yen strengthening.<\/p>\n","protected":false},"excerpt":{"rendered":"

While I have talked about currencies, it has primarily been about the fall of the dollar relative to the Euro. A more significant risk in the short term is a strengthening Yen. Much of the current investment mania has been driven by the Yen carry trade. Basically, Japan has the lowest interest rates in the …<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1261,1080,973],"tags":[],"class_list":["post-199549","post","type-post","status-publish","format-standard","hentry","category-bubble","category-currency","category-economy"],"_links":{"self":[{"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/posts\/199549"}],"collection":[{"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/comments?post=199549"}],"version-history":[{"count":0,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/posts\/199549\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/media?parent=199549"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/categories?post=199549"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/tags?post=199549"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}