Part 2: the total amount outstanding lent overseas by Japanese Financial Institutions was equivalent to a mind-boggling 144,492,600,000,000 $JPY 😨

And that's only one part of the story. The second part is called "Cross Currency Swap"...

https://twitter.com/DarioCpx/status/1717725925125812613

...for every 1 $JPY borrowed to put in place a carry trade, you have at least 3.5X times (and not 4 because risk is never hedged completely) that volume on top of that in terms of derivative notional! Therefore, there are potentially 3.5 TRILLION $USD eqv. linked to the $JPY carry trade globally.

Part 3: 🚨WHILE INVESTORS DREAM OF SEASONALITY THEY DONT SEE THE BANK OF JAPAN #BOJ NIGHTMARE INCOMING! 🚨

https://twitter.com/DarioCpx/status/1719161799260676152

Furthermore, a good chunk of the global financial system is where it is today thanks to the endless $JPY money printing over the years and the insane scale of the $JPY carry trade. I have already pointed out many times how the #BOJ managed to create the worst possible environment for the $JPY Carry Traders, but now we are extremely close to the moment it all starts falling apart and people might begin to scramble to limit their losses.

How will a $JPY carry trade unwinding work? Follow me:

1 - First, the foreign assets in $USD $EUR but also $AUD , $NZD and $GBP will have to be liquidated. A good chunk of these are government bonds, but a big portion are megacap #stocks like $AAPL or $MSFT .

Imagine selling government bonds right now when most of them are trading at deep discounts below par and as a “seller”...

2 - After selling assets at a deep loss, now the carry trader needs to close its hedging. This means returning the same amount of $USD they borrowed at the very beginning of the trade to the broker that will deliver $JPY to them. Now, here is the big problem, carry traders are deep underwater on their hedging too at the moment because of $JPY (since they were “long” the currency as a hedge) and the Japan yields (since everyone didn't bother to pay extra to get a fixed rate $JPY funding while...

⚠️ SOMEONE SOMEWHERE HAS TO PAY A HIGH PRICE FOR BANK OF JAPAN INCOMPETENCE ⚠️

https://twitter.com/DarioCpx/status/1717334125223538878

THINGS ARE SO BAD THAT $JPY WILL KEEP DEPRECIATING IF JAPAN RAISES RATES. Why? Because they created a giant system that can only survive on cheap and abundant liquidity, a system that includes both internal and foreign financial companies. So if the #BOJ increases the cost of funding, they will need to print even more $JPY to fill the larger hole created in banks' balance sheets both inside and outside Japan.