Eliminate carry trades, leave behind anxiety that is difficult to get out of the market - and regain calm

2024/8/12 13:05 JST (some excerpts)
Traders rush to sell assets to repay loans in response to rapid yen growth
Global market turmoil, risk exposure due to continued low interest rates in Japan

Now, the global market turmoil on the 5th of this month looks rather like short-term turmoil and a fleeting panic caused by the Bank of Japan's slight policy change and a rekindling of concerns about the US recession (recession).
　　However, what caused such a sudden upheaval and rapid convergence exposed how vulnerable the market is to the strategies that hedge funds use to invest hundreds of billions of dollars in betting almost all over the world.
　　The carry trade of yen funds was a reliable way to easily obtain profits. Funds were borrowed from Japan, which is the world's last source of low interest rate funds, and funds were simply invested into Mexican bonds with yields over 10%, soaring NVIDIA stocks, or crypto assets (virtual currency) bitcoins. If the depreciation of the yen continued, loan repayment costs fell further, and the return increased just that much.