YEN/USD short, USD long and making milkshake.
Japan is stuck in a debt trap.
Shorting the YEN/USD: Milkshake and Carry Trade going hyperpolic
The Bank of Japan (BOJ) announced the end of its interest rate hiking cycle on September 20, 2024. This decision was made to stabilize the economy and prevent further market disruptions. The BOJ had to stop increasing rates at 25 basis points, or 0.25%.
They can’t go higher to "normalize" their interest rates. Japan is stuck as a carry trade slave. Foreign investors borrow in Yen at low rates, convert the money into USD, and buy US Treasuries or other riskier assets with higher returns. A weakening Yen increases the weight of their foreign debt.
Japan has the highest debt-to-GDP ratio at 261%, higher even than Venezuela which is at 240%. This is why the BOJ was trying to "normalize" its central bank interest rate, increasing it from the decimal 0.05% level.
However, the BOJ announced on September 20, 2024, that they can’t go higher than 0.25% as this is bringing in too much inflation. So, in a nutshell, the BOJ can’t use its central bank rate to control inflation. Japan is stuck in a major debt crisis, and by trying to increase its interest rate for the first time in 17 years, it has exposed its central weakness.
This is why foreign predatory investors and traders are going to exploit it at hyperbolic levels. The Dollar Milkshake Theory is in full effect here. It is no longer a "theory. The Yen Carry Trade hyperbolic mode has started. The US Dollar Milkshake on behalf of the Yen is ramping up fast.
Operation Milkshake is a go! 😂
The Japanese are stuck in a deadly debt cycle.
The situation is dire!
OMS
P.S. On SOFR, its spread over the Funds Rate is spiking and the highest outliers of the SOFR average rate are suggesting increasing counterparty risk on top of the elevated overall risk.
Watching this like a hawk.
Shorting the YEN/USD: Milkshake and Carry Trade going hyperpolic
The Bank of Japan (BOJ) announced the end of its interest rate hiking cycle on September 20, 2024. This decision was made to stabilize the economy and prevent further market disruptions. The BOJ had to stop increasing rates at 25 basis points, or 0.25%.
They can’t go higher to "normalize" their interest rates. Japan is stuck as a carry trade slave. Foreign investors borrow in Yen at low rates, convert the money into USD, and buy US Treasuries or other riskier assets with higher returns. A weakening Yen increases the weight of their foreign debt.
Japan has the highest debt-to-GDP ratio at 261%, higher even than Venezuela which is at 240%. This is why the BOJ was trying to "normalize" its central bank interest rate, increasing it from the decimal 0.05% level.
However, the BOJ announced on September 20, 2024, that they can’t go higher than 0.25% as this is bringing in too much inflation. So, in a nutshell, the BOJ can’t use its central bank rate to control inflation. Japan is stuck in a major debt crisis, and by trying to increase its interest rate for the first time in 17 years, it has exposed its central weakness.
This is why foreign predatory investors and traders are going to exploit it at hyperbolic levels. The Dollar Milkshake Theory is in full effect here. It is no longer a "theory. The Yen Carry Trade hyperbolic mode has started. The US Dollar Milkshake on behalf of the Yen is ramping up fast.
Operation Milkshake is a go! 😂
The Japanese are stuck in a deadly debt cycle.
The situation is dire!
OMS
P.S. On SOFR, its spread over the Funds Rate is spiking and the highest outliers of the SOFR average rate are suggesting increasing counterparty risk on top of the elevated overall risk.
Watching this like a hawk.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.