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Strategies & Market Trends : John Pitera's Market Laboratory
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To: robert b furman who wrote (7907)6/4/2007 10:20:19 AM
From: Hawkmoon  Read Replies (3) of 33421
 
If the monetary supply of Japan has been down for so long (and at double digits),just hwere does this famous carry trade show up?

Because savings outpaces domestic lending in Japan. Thus, for the banks to remain solvent, they are "forced" to look to foreign borrowers to make up the deficit. And then the foreigners take that borrowed money and invest in higher yielding instruments..

In sum, without the carry trade in Japanese yen, those banks would have a hard time making a profit due to lack of domestic economic growth.

This problem won't be solved until the domestic lending market in Japan replaces the need for foreign borrowers to prop up the Japanese banking sector.

Just my .02 worth.

Hawk
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