The Japanese Carry Trade | Why Japan’s Hike to 1% Erodes the Funding but Hasn’t Flipped the Flow
The Japanese Carry Trade | The Margin, Not the Direction Two Carry Trades, & Why Japan’s Hike to 1% Erodes the Funding but Hasn’t Flipped the Flow
The Japanese Carry Trade | The Margin, Not the Direction Two Carry Trades, & Why Japan’s Hike to 1% Erodes the Funding but Hasn’t Flipped the Flow On 16 June the Bank of Japan lifted its policy rate to 1.00%, the highest since 1995. The tape reached for “the great unwind.” Yet USD/JPY sits near 160 and Tokyo has spent ~¥11.7tn defending the yen since late April. The trade has not snapped. What is breaking is quieter, and harder to reverse.
Fundamentals through the noise The noise is “the great unwind” — a single, cinematic event endlessly re-forecast off the August-2024 template. The fundamental is two trades on two clocks: a speculative leg that is lighter and less dangerous than the tape implies, and a real-money leg that is repricing quietly and will not reverse on a press conference. Japan at 1.00% has changed the margin of the world’s most important funding trade without yet changing its direction. The direction will change — not in a session, but in the patient redeployment of a generation’s savings now that yield, at last, is real at home.
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