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Japan's government debt is a US$20 trillion 'carry trade': Deutsche Bank
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Japan's government debt is a US$20 trillion 'carry trade': Deutsche Bank
The logo of Deutsche Bank is seen in Brussels, Belgium, on Dec 6, 2022. (Photo: REUTERS/Yves Herman)
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14 Nov 2023 06:37PM (Updated: 14 Nov 2023 07:14PM)
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TOKYO: Japan's government is engaged in a massive US$20 trillion "carry trade" - the funding of loans and foreign assets by borrowing low-cost yen - that could bring unexpected risks if the central bank tightens policy, Deutsche Bank analysts warn.
Using research by the San Francisco Federal Reserve and International Monetary Fund, Deutsche's head of currency research George Saravelos analysed a consolidated balance sheet of the Japanese government including the government-run pension fund GPIF, the Bank of Japan (BOJ), and state-owned banks, showing the asset-liability mix of its US$20 trillion debt.
That debt, Deutsche Bank found, amounts to an enormous "trade" invested abroad at high interest rates and funded by low-rate, short-term borrowing in yen.