Betting on the yen: how Japan's carry trade risks spilling into global markets
· Business · Financial Times, Bloomberg, LiveMint
The Bank of Japan's shift away from ultra-loose policy has reversed decades of yen-funded carry trades, triggering volatility in global bond and currency markets. Japanese investors have unwound trillions of dollars in yen-denominated positions, seeking higher returns abroad as the yen strengthens past 150 per dollar. This unwinding has forced sales of foreign assets, putting pressure on emerging market currencies and European equities. Analysts warn the rapid adjustment could amplify market swings if the yen continues appreciating faster than corporate earnings can adjust.
Why it matters
Indian exporters and IT firms face currency headwinds as the yen rally dents overseas earnings, while domestic investors with exposure to global bond funds may see short-term volatility. The yen's strength could also ease import costs for commodities priced in dollars, offering modest relief to India's trade deficit.
Read the original report — Financial Times
Join us on Telegram
Breaking news the moment it lands. At 10,000 members we ship the Android app.