II. Concept of Yen Carry Trade
1. Definition of Yen Carry trade
2. Carry Trade Risks
III. The History of Yen Carry Trade
IV. The Reason of Recent Unwinding Yen Carry Trade
V. The Effects of Unwinding Yen Carry Trade
1. Correlation with stock markets around the world
2. Bubble in Yen and depreciation in other major currencies
Today, 5th November. 2008, the dollar dipped to the lower 99 yen range after media reports of Obama`s victory in the presidential race against Republican John McCain, as the Democratic candidate`s victory had largely been factored in and investors rushed to take profits on hearing the news. But whoever wins, it makes little difference. The global economy is now in such a strong downdraft and the fact that a black became the U.S. president cannot change the trend of currency market.
What brought this strong trend? This issue is not only the matter for Time or the Economist-readers but the main source of my parents’ worrying about their financial support for me in Japan. As markets in Asia are slumping and disappointing economic news is being repeated everyday, currency madness, particularly between Japanese Yen and Korean Won, overtakes my family. In that, the currency crisis is right next to my life.
Then again, what brought the frenetic phenomenon? Based on the major assumption by many experts, it would be explained with the so-called yen carry trade.
Japan`nterest Rate and the Yen Carry Trade, May 7. 2007, Bon-Kwan Research Fellow, Samsung Economic Research Institute
The Implication of Growing Fiscal Deficits for the Japanese Economy, By Koo Bon-Kwan, November 2008, Samsung Economic Research Institute
Exchange Rate and Financial Cooperation in East Asia and USA, Yen Kyun Wang, 국제지역연구 제11권 제3호, p465-466
Homepages for education about yen carry trade
(http://carrytrade101.com/, http://www.economicshelp.org, http://Wikipidea.com)
Homepage of Cabinet Office Japan (www.cao.go.jp)
Homepage of Bank of Japan (www.boj.or.jp)
Homepage of Ministry of Finance Japan (www.mof.go.jp)
Ministry of Finance Japan, Fiscal Policy Data (www.mof.go.jp/zaisei/con_07.html)