Carry Trade

One thread from the complex sweater that is global finance to keep an eye on is the reversal of the Japanese yen carry trade. As a refresher, for decades investors have been conditioned to borrow in cheap, low-interest yen, buy foreign assets (U.S. assets) that yield or earn more, then eventually sell them and pay off those yen loans at a profit. A declining yen gives the carry trade an additional boost to profits. Sell dollar assets at higher prices, convert those dollars into a cheaper yen (getting more yen), then pay off the loan with money left over from…