Bloomberg (gated) report that the yen carry trade, which collapsed last year, could see a major revival in the wake of Japan’s recent election, according to investors.
- The strategy—borrowing low-yield yen to invest in higher-yielding assets abroad—is gaining traction after Prime Minister Shigeru Ishiba lost his upper-house majority.
- The loss may push Ishiba to increase government spending to win over opposition support, while political uncertainty could prompt the Bank of Japan to slow its pace of rate hikes—both of which would weaken the yen and favour carry trades.
There is more at the Bloomberg piece, but thats the gist of it.
The yen has surged since the election, early adopters of the renewed carry trade will be nursing FX losses.
