JPY carry trades

NZ Central Bank is very concerned with the JPY Carry Trades.

What is the story behind this?

What is the implication to the JPY?

Are these central banks complaining because it is causing artificial weakness to the JPY? And making the opposite pair higher? (ie, NZD has been gaining value because of the NZDJPY carry?)

can anyone explain this?

Because of interest rates arbitrage. A lot of institutional investors and hedge managers shorts yen in favor of the kiwi to benefit from interest rate difference, which weakens the JPY and strengthens the NZD.
Also, Wednesday 5:00pm ET is quite important becasue interests gained on carry trades is tripled becasue settlments is carried over the weekend.

Also with the comments being made about concern for these carry trades, for whatever reason, and the Russian reserve diversification into Yen there is a risk carry traders may be caught and there may be a strengthening of the yen.

HELP!!!! me understand this simple problem

Carry Trades / Interest / Roll over.
I am confused! and I need help, I have spent hours speaking to brokers and I am still not getting the answer. I am looking to do position trades on GBP JPY, and on this currency there is a huge diffrential between the sept futures and the spot by over 200 pips.
So currently if I want to go short, and expecting to hold the position for several weeks the sept sell price is 24000, but the spot is 24318 - so I am getting 318 pips less. However, as time goes by and we come closer to expiry than the spot and future gets closer and closer.
So in my example, I start with a loss of 318 pips. Assuming that during this period say the spot goes down by 300 pips than technically I have not made any money - Is that correct??
HELP! Or am i being silly not able to understand?

MrMikal and others I am sure have researched or understand this way more than I do. If you go short in a futures account, it will go down almost the same % as the spot market will. However, spot and futures are not perfectly balanced. In regards to carry trades, a futures contract will go UP or LONG in this case more than the spot market would, naturally then of course it will go DOWN or SHORT less. This is so people can't just hedge their position in the spot market with futures.

What I am saying, if futures and spot were exactly the same ... you could making killings off of interest. They are not the same exactly, futures will move that extra 100, 200 pips etc to cover any interest gained. In your current example, the Sept. futures contract should still be slightly in profit ... although, the contract will drop a less % rate than the spot market would. This is because of the interest difference.

Bump this thread tomorrow, others know more.

MARWAN
The futures contract of the G/J is very thinly traded.
You will experience MUCH slippage in your entry and exit.
Also I believe the Fut contract is for 125k vs 100k on the Fx.
So you have a price differential to consider.

I've been fooling around w/ the yen and swissy and have found it difficult.
The Fx and Future price will converge as the Future nears expiry, but in what direction is the question.

Since you can only buy the FX and sell the Future you can only control your P/L risk by the size of each position.
To do that you want to be on the right side of the weakness or strength of the pair.

With oppositely priced FX-FUT pairs such as U/J and U/C you can do a historical spread chart vs the appropriate futures contract and analyze the widest and tightest spreads before contraction or expansion.
It will give an indication of the expected direction, however most of the time these levels are not at extremes and therefore still risky.

You can then increase or not each or one of the positions.

Just some thoughts on my work on this subject.