The $20 Trillion Carry Trade Has Finally Blown Up
Late last year, when the latest cycle of the yen carry trade was still in its relative infancy (the USDJPY was in the low 140s then, on its way to a mindblowing and inflation-unleashing 162, not to mention two BOJ intervention), we explained why Japan's economy is now effectively dead, and the only thing missing was declaring the time of death. The reason: the $20 trillion carry trade that the government of Japan has been engaging in for the past 40 years has been one giant a ticking timebomb, one which can not be defused, and when it blows up, it's game over for the Bank of Japan.
去年底，当日元套利交易的最新周期仍处于相对初期阶段（当时美元兑日元在 140 低位，正朝着令人震惊且引发通胀的 162 迈进，更不用说两次日本央行干预），我们解释了为什么日本经济现在实际上已经死去，唯一缺少的就是宣布死亡时间。原因是：日本政府在过去 40 年中进行的 20 万亿美元的套利交易一直是一个巨大的定时炸弹，这个炸弹无法拆除，一旦爆炸，日本央行就完蛋了。
Why? well, with the help of DB's chief FX strategist George Saravelos we explained why last December when we also quantified the total size of the trade whose blow up will demand a coordinated central bank rescue in the coming days (not surprisingly the world's central bankers have no idea what has happened and will be panicking after the fact as usual, and unleashing a historic flood of rate cuts in the coming weeks to stabilize the situation).
为什么？好吧，在德意志银行首席外汇策略师乔治·萨拉维洛斯的帮助下，我们在去年十二月解释了原因，同时量化了这笔交易的总规模，这笔交易的崩溃将需要协调的中央银行救助（毫不奇怪，世界各国的中央银行家对发生的事情一无所知，通常在事后会感到恐慌，并在接下来的几周内释放出历史性的降息潮以稳定局势）。
For those who missed it back in December, here it is again, only this time the carry trade has burst, and either the BOJ will do nothing and watch as its economy implodes, or it will panic reverse the idiotic rate hike it did last week and triples down on easing to contain the crash that just pushed the Nikkei into a bear market; in either case, however, it is unfortunately game over for Japan.
对于那些在去年十二月错过的人，这里再次提及，只不过这次套利交易已经破裂，或者日本央行将无所作为，眼睁睁看着其经济崩溃，或者它将惊慌失措地逆转上周愚蠢的加息，并加大宽松力度以遏制刚刚将日经指数推入熊市的崩溃；然而，无论哪种情况，不幸的是，日本的游戏已经结束。
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The government of Japan is engaged in one massive $20 trillion carry trade: here is the toxic dilemma faced by the Japanese central bank now that it has reached the end of the road: on one hand, if the Bank of Japan decides to tighten policy meaningfully, this trade will need to unwind. On the other, if the Bank of Japan drags its feet to keep the carry trade going, it will require higher and higher levels of financial repression but ultimately pose serious financial stability risks, including potentially a collapse in the yen.
日本政府正在进行一项巨大的 20 万亿美元的套利交易：日本中央银行现在面临的有毒困境是：一方面，如果日本银行决定有意义地收紧政策，这笔交易将需要解除。另一方面，如果日本银行拖延以维持套利交易，将需要越来越高的金融压制，但最终会带来严重的金融稳定风险，包括日元可能崩溃。
As Saravelos puts it, “Either option will have huge welfare and distributional consequences for the Japanese population: if the carry trade unwinds, wealthier and older households will pay the price of higher inflation via rising real rates; if the BoJ delays, younger and poorer households will pay the price via a decline in future real incomes.”
正如萨拉维洛斯所说：“无论哪种选择都会对日本人口产生巨大的福利和分配后果：如果套利交