{"id":1454917,"date":"2024-02-02T03:00:00","date_gmt":"2024-02-02T08:00:00","guid":{"rendered":"https:\/\/bugaluu.com\/news\/?p=1454917"},"modified":"2024-02-02T03:00:00","modified_gmt":"2024-02-02T08:00:00","slug":"aozora-delivers-grim-reminder-of-japan-carry-trade-risk","status":"publish","type":"post","link":"https:\/\/bugaluu.com\/news\/aozora-delivers-grim-reminder-of-japan-carry-trade-risk\/1454917\/","title":{"rendered":"Aozora Delivers Grim Reminder Of Japan Carry-Trade Risk"},"content":{"rendered":"<p><span class=\"field field--name-title field--type-string field--label-hidden\">Aozora Delivers Grim Reminder Of Japan Carry-Trade Risk<\/span><\/p>\n<div class=\"clearfix text-formatted field field--name-body field--type-text-with-summary field--label-hidden field__item\">\n<p><em>By Masaki Kondo, Bloomberg Markets Live reporter and strategist<\/em><\/p>\n<p>Aozora Bank\u2019s shock loss projection serves as a reminder of just how little room the Bank of Japan has to tighten its policy and for the nation\u2019s bond yields to rise.<\/p>\n<p>Carry trade isn\u2019t just about buying and selling currencies in the spot or forward market (see &#8220;<a href=\"https:\/\/www.zerohedge.com\/markets\/20-trillion-carry-trade-will-destroy-japan\">The $20 Trillion Carry Trade That Will Destroy Japan<\/a>&#8220;). When investors in a country where interest rates are low raise funds domestically and invest the proceeds in higher-yielding assets abroad, it\u2019s a form of carry trade. Banks in Japan can do this by gathering deposits at an average rate on ordinary deposits at 0.001% and buying higher-yielding overseas securities, such as five-year Treasuries with a yield of 3.8<strong>%. <\/strong><\/p>\n<p><strong>It looks like <a href=\"https:\/\/www.zerohedge.com\/markets\/dominos-after-nycb-japan-bank-implodes-massive-us-cre-writedown\">Aozora has been doing just that<\/a>.<\/strong><\/p>\n<p><strong><a href=\"https:\/\/cms.zerohedge.com\/s3\/files\/inline-images\/aozora%20bank%202.jpg?itok=t2KE31d6\"><\/a><\/strong><\/p>\n<p>The bank sold foreign securities to cut losses that were mainly caused by a rise in US interest rates. Nearly 40% of Aozora\u2019s securities portfolio consists of foreign bonds but a share of foreign-currency assets is probably higher considering other asset classes such as ETFs include overseas securities. Japanese government bonds made up just 2% of the total portfolio.<\/p>\n<p><a href=\"https:\/\/cms.zerohedge.com\/s3\/files\/inline-images\/past%20decade%20buying.jpg?itok=R7b9b-e1\"><\/a><\/p>\n<p>This isn\u2019t to say other Japanese banks are facing similar risks. But Japanese investors as a whole have boosted their overseas investment since the BOJ expanded monetary easing in 2013. Even if overseas assets have positive returns, <strong>a substantial rise in yen borrowing costs could risk triggering unwinding of this big Japan carry trade.<\/strong><\/p>\n<p>This suggests a first rate hike since 2007 will be a balancing act for the BOJ. It will probably settle for only small increases to avoid wreaking havoc. This outlook also argues for low bond yields in Japan.<\/p>\n<p><em>More <a href=\"https:\/\/www.zerohedge.com\/The%20$20%20Trillion%20Carry%20Trade%20That%20Will%20Destroy%20Japan\">here.<\/a><\/em><\/p>\n<\/div>\n<p>      <span class=\"field field--name-uid field--type-entity-reference field--label-hidden\"><a title=\"View user profile.\" href=\"https:\/\/cms.zerohedge.com\/users\/tyler-durden\" class=\"username\">Tyler Durden<\/a><\/span><br \/>\n<span class=\"field field--name-created field--type-created field--label-hidden\">Thu, 02\/01\/2024 &#8211; 22:00<\/span><\/p>\n<p>\u200b<a href=\"https:\/\/www.zerohedge.com\/markets\/aozora-delivers-grim-reminder-japan-carry-trade-risk\" target=\"_blank\" class=\"feedzy-rss-link-icon\" rel=\"noopener\">Read More<\/a>\u00a0<\/p>\n<p>\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Aozora Delivers Grim Reminder Of Japan Carry-Trade Risk By Masaki Kondo, Bloomberg Markets Live reporter and strategist Aozora Bank\u2019s shock loss projection serves as a&#8230;<\/p>\n","protected":false},"author":0,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-1454917","post","type-post","status-publish","format-standard","hentry","category-news","wpcat-1-id"],"_links":{"self":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/posts\/1454917","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/comments?post=1454917"}],"version-history":[{"count":0,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/posts\/1454917\/revisions"}],"wp:attachment":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/media?parent=1454917"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/categories?post=1454917"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/tags?post=1454917"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}