Thanks! Yours is the first piece that helped me understand why the Japanese stock market crashed with the unwinding of the carry trade. Global markets fell because those who had the carry trade were closing their carry trade (having used Yen loans to fund global asset purchases)... but if I got this finally - the Nikkei fell because the Japanese institutions that had funded the carry trade must have got the Nikkei index (or stocks) as collateral and were selling it to reduce their exposure to the carry trade as the lenders to the investors who were investing in the carry trade. Is that fair?
Thanks. You got it right. This would be one of the reasons, but I could imagine many others (expectations of further interest rates, reduction of the BOJ B/S, etc)
Thanks! Yours is the first piece that helped me understand why the Japanese stock market crashed with the unwinding of the carry trade. Global markets fell because those who had the carry trade were closing their carry trade (having used Yen loans to fund global asset purchases)... but if I got this finally - the Nikkei fell because the Japanese institutions that had funded the carry trade must have got the Nikkei index (or stocks) as collateral and were selling it to reduce their exposure to the carry trade as the lenders to the investors who were investing in the carry trade. Is that fair?
Thanks. You got it right. This would be one of the reasons, but I could imagine many others (expectations of further interest rates, reduction of the BOJ B/S, etc)
Thank you! Have a great weekend!