There is tremendous foreign exchange risk in your example. The yen carry trade is a 12 trillion unit business. You can open any fx account and earn $13 in daily carry on long 100k usdjpy. $13 is one tick on the futures contract. :eek:
You can very easily borrow in yen. The japanese are injecting liquidity in the market for years in a desperate attempt to combat deflation. That's what "quantitative easing" was all about. Yen based carry trade is one of the most popular financial schemes in the last years. Borrow yen and buy anything you can with it. Usually, as someone has said, this means converting first in USD so you have a much larger range of investment instruments. Even in Romania (with its underdeveloped banking system) any person can go to the bank and make loans directly in Yen. Although I would rather go long yen than short at this moment...
Hey maybe the cheap money in Japan is the source of the world's risk capital? Could there be a connection between yen money supply, yen exchange rates and price of risky assets (like stocks)?
it's an interesting topic, looks like good idea to have a way to borrow money at current 0.25% ann. rate... Does somebody have an idea how to realise it into reality without being under risk of changing exchange rate USD/JPY? thanks for every idea... Alex
This is a little facetious, but you could get rid of your Yen risk by investing the proceed in something Yen denominated.
Hi ! Could you describe more precisely? I can borrow JPY at Japan bank at 0.25%, convert it to USD, put USD at 5.25% money account, after that I have to fix exchange rate to current date...how to do it? Is there some way to do it? USD/JPY futures? or what? thanks Alex
Oh, c'mon people, be realistic here. How can the average investor or retail trader really borrow X amount from a Japanese bank? Can they fly to Japan and simply take out a loan for a rate far less than here? Is that even possible? To do that whole Yen trade thing, is a bit more abstract. I mean IB or Oanda or whomever you deal in FX isn't simply going to give you this cash so that you can invest it in say T-bills or something, its going to stay in your trading account earning that $13 bucks or whatever that was mentioned here. If I'm wrong, show me how I as a retail trader can borrow say $100k worth of cash from an actual Japanese bank?
I meant borrow in yen to purchase yen denominated assets. But you don't get the interest rate differential because yen deposit rates are low too. Traveler