Yen Carry Trade Is a ‘Ticking Time Bomb,’ Warns BCA Research

The carry trade in the yen is “a ticking time bomb,” with the popular hedge-fund strategy vulnerable to a massive unwind, according to BCA Research analysts.

The trade — broadly defined as borrowing in the low-yielding Japanese currency to fund purchases of higher-yielding assets — benefits from the greater “carry” on these foreign investments. But the trade unravels if the riskier assets tumble or the yen rallies.