This Wall Street investment bank warns: Yen arbitrage trading is a "time bomb"
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Yen arbitrage trading involves borrowing low-interest yen to purchase high-yield assets to earn interest rate differentials, but it can quickly unravel during sharp declines in high-risk assets or when the yen appreciates. BCA Research warns that the scale of arbitrage trading has surged in recent years, potentially repeating the collapse scenarios of 2008, 2015, and 2020. The yen has appreciated over 1% this year, and the market is focused on the possibility of the Bank of Japan raising interest rates, which could trigger a chain reaction if the yen appreciates
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