日元的套利交易

The Broad Yen Carry Trade∗ Masazumi Hattori Bank of Japan Hyun Song Shin Princeton University October 31, 2007 ∗The views expressed in this presentation are those of the authors and do not necessarily represent those of the Bank of Japan. The Broad Yen Carry Trade Masazumi Hattori and Hyun Song Shin Yen Carry Trade • Yen carry trade: borrow yen to fund purchase of higher yielding currencies • Its importance extends beyond merely the FX market • Tied with fluctuations of global balance sheets — implications for financial cycles — implications for global spillovers in monetary policy 1 The Broad Yen Carry Trade Masazumi Hattori and Hyun Song Shin Balance Sheet Trail Following the trail of leveraged bets Wall St Bank NY Head Office Wall St Bank Japan Office Japanese Banks Hedge Fund Interoffice accounts JPY interbank market 2 The Broad Yen Carry Trade Masazumi Hattori and Hyun Song Shin Interoffice Accounts of Japan Office Assets Liabilities Japanese securities call loans call money interoffice assets interoffice liabilities Assets Liabilities Japanese securities call loans call money interoffice assets interoffice liabilities 3 The Broad Yen Carry Trade Masazumi Hattori and Hyun Song Shin Interbank Assets of Foreign Banks in Japan 0 5 10 15 20 25 30 35 40 45 50 Ja n - 90 Ja n - 91 Ja n - 92 Ja n - 93 Ja n - 94 Ja n - 95 Ja n - 96 Ja n - 97 Ja n - 98 Ja n - 99 Ja n - 00 Ja n - 01 Ja n - 02 Ja n - 03 Ja n - 04 Ja n - 05 Ja n - 06 Ja n - 07 Date 10 0 bi lli on y en Interbank Assets (Call Loan) of Foreign Banks in Japan 4 The Broad Yen Carry Trade Masazumi Hattori and Hyun Song Shin Interbank Liabilities of Foreign Banks in Japan 0 20 40 60 80 100 120 140 160 Ja n - 90 Ja n - 91 Ja n - 92 Ja n - 93 Ja n - 94 Ja n - 95 Ja n - 96 Ja n - 97 Ja n - 98 Ja n - 99 Ja n - 00 Ja n - 01 Ja n - 02 Ja n - 03 Ja n - 04 Ja n - 05 Ja n - 06 Ja n - 07 Date 10 0 bi lli on y en Interbank Liabilities (Call Money) of Foreign Banks in Japan 5 The Broad Yen Carry Trade Masazumi Hattori and Hyun Song Shin Net Interbank Assets of Foreign Banks in Japan -100 -90 -80 -70 -60 -50 -40 -30 -20 -10 0 10 20 Ja n - 90 Ja n - 91 Ja n - 92 Ja n - 93 Ja n - 94 Ja n - 95 Ja n - 96 Ja n - 97 Ja n - 98 Ja n - 99 Ja n - 00 Ja n - 01 Ja n - 02 Ja n - 03 Ja n - 04 Ja n - 05 Ja n - 06 Ja n - 07 Date 10 0 bi lli on y en Net Interbank Assets of Foreign Banks in Japan 6 The Broad Yen Carry Trade Masazumi Hattori and Hyun Song Shin Net Interoffice Accounts of Foreign Banks in Japan -200 -180 -160 -140 -120 -100 -80 -60 -40 -20 0 20 40 60 80 100 Ja n - 90 Ja n - 91 Ja n - 92 Ja n - 93 Ja n - 94 Ja n - 95 Ja n - 96 Ja n - 97 Ja n - 98 Ja n - 99 Ja n - 00 Ja n - 01 Ja n - 02 Ja n - 03 Ja n - 04 Ja n - 05 Ja n - 06 Ja n - 07 Date 10 0 bi lli on y en Net Interoffice Accounts of Foreign Banks in Japan 7 The Broad Yen Carry Trade Masazumi Hattori and Hyun Song Shin Channeling of Yen Liquidity out of Japan Scatter chart of change in net interoffice accounts against change in net call loans (units: 100 billion yen) -60 -40 -20 0 20 40 60 -40 -30 -20 -10 0 10 20 30 40 Monthly change in net call loan M on th ly c ha ng e in n et in te ro ffi ce ac co un ts 8 The Broad Yen Carry Trade Masazumi Hattori and Hyun Song Shin Basic Balance Sheet Arithmetic: Passive Investor • Household balance sheet Assets Liabilities House, 100 Equity, 10 Mortgage, 90 Leverage = Assets Equity = 10 • Assume that the market value of debt is constant at 90. L = AA− 90 9 The Broad Yen Carry Trade Masazumi Hattori and Hyun Song Shin • Leverage is inversely related to total assets: 97 98 99 100 101 102 103 8 9 10 11 12 13 L A 10 The Broad Yen Carry Trade Masazumi Hattori and Hyun Song Shin Balance Sheet Size and Leverage: Households From Adrian and Shin (2007) -4 -2 0 2 4 6 8 -1 -0.5 0 0.5 1 1.5 Leverage Growth (Percent Quarterly) To ta l A ss et G ro w th (P er ce nt Q ua rt er ly ) U.S. Flow of Funds (1963 - 2006) 11 The Broad Yen Carry Trade Masazumi Hattori and Hyun Song Shin Financial Institutions Financial institutions actively manage balance sheets so as • to meet value at risk or economic capital targets • to meet performance measures such as return on equity (ROE). • to hit desired credit ratings • meet regulatory requirements What are the consequences? 12 The Broad Yen Carry Trade Masazumi Hattori and Hyun Song Shin Security Dealers and Brokers -30 -20 -10 0 10 20 30 40 -50 -40 -30 -20 -10 0 10 20 30 40 Leverage Growth (Percent Quarterly) To ta l A ss et G ro w th (P er ce nt Q ua rt er ly ) U.S. Flow of Funds (1963 - 2006) 13 The Broad Yen Carry Trade Masazumi Hattori and Hyun Song Shin Targeting Constant Leverage Initial balance sheet Assets Liabilities Securities, 100 Equity, 10 Debt, 90 Assume price of debt approximately constant. Suppose the security price increases by 1% to 101. Assets Liabilities Securities, 101 Equity, 11 Debt, 90 14 The Broad Yen Carry Trade Masazumi Hattori and Hyun Song Shin Leverage falls to 101 11 = 9.18 If bank targets constant leverage, it must take on additional debt of D to purchase D worth of securities on the asset side so that assets equity = 101 +D 11 = 10 The solution is D = 9. In other words, the bank takes on additional debt worth 9, and with this money purchases securities worth 9. The demand curve is upward-sloping. 15 The Broad Yen Carry Trade Masazumi Hattori and Hyun Song Shin The new balance sheet looks like this. Assets Liabilities Securities, 110 Equity, 11 Debt, 99 The leverage is now back up to 10. The mechanism works in reverse, too. Suppose there is shock to the security price so that Assets Liabilities Securities, 109 Equity, 10 Debt, 99 Leverage is too high (109/10 = 10.9). 16 The Broad Yen Carry Trade Masazumi Hattori and Hyun Song Shin Sell securities worth 9, paydown debt of 9. Assets Liabilities Securities, 100 Equity, 10 Debt, 90 Back to leverage of 10. Supply curve is downward-sloping. What is the aggregate impact of perverse demand and supply curves? 17 The Broad Yen Carry Trade Masazumi Hattori and Hyun Song Shin Aggregate Impact Stronger balance sheets Increase B/S size Target leverage Asset price boom Weaker balance sheets Reduce B/S size Target leverage Asset price decline 18 The Broad Yen Carry Trade Masazumi Hattori and Hyun Song Shin Carry Trades and VIX Index Risk appetite as measured by the VIX index. 10 20 30 40 - 200 - 150 - 100 - 50 0 50 100 Net Interoffice Accounts (100 billion yen) VIX 19 The Broad Yen Carry Trade Masazumi Hattori and Hyun Song Shin Impact on Exchange Rates of Carry Currencies (NZD/JPY) 70 75 80 85 90 95 100 7 / 1 3 / 2 0 0 6 8 / 1 3 / 2 0 0 6 9 / 1 3 / 2 0 0 6 1 0 / 1 3 / 2 0 0 6 1 1 / 1 3 / 2 0 0 6 1 2 / 1 3 / 2 0 0 6 1 / 1 3 / 2 0 0 7 2 / 1 3 / 2 0 0 7 3 / 1 3 / 2 0 0 7 4 / 1 3 / 2 0 0 7 5 / 1 3 / 2 0 0 7 6 / 1 3 / 2 0 0 7 7 / 1 3 / 2 0 0 7 8 / 1 3 / 2 0 0 7 20 The Broad Yen Carry Trade Masazumi Hattori and Hyun Song Shin Interest Rate Differential Net interoffice accounts (in red, right hand scale) and difference between overnight rates in Japan and simple average of USD, EUR and AUD overnight rates (in green, left hand scale). -6 -5 -4 -3 -2 -1 0 J a n - 9 9 J a n - 0 0 J a n - 0 1 J a n - 0 2 J a n - 0 3 J a n - 0 4 J a n - 0 5 J a n - 0 6 J a n - 0 7 In te re st ra te d iff er en tia l ( % ) -250 -200 -150 -100 -50 0 50 100 N et in te ro ffi ce a cc ou nt s (1 00 b ill io n ye n) 21 The Broad Yen Carry Trade Masazumi Hattori and Hyun Song Shin Interest Rate Differential Scatter chart of the net interoffice accounts and interest rate differential 99/1 07/8 -200 -150 -100 -50 0 50 100 -6 -5 -4 -3 -2 Interest Rate Differential (%) N et In te ro ffi ce A cc ou nt s (1 00 b ill io n ye n) (t statistic = −7.8) 22 The Broad Yen Carry Trade Masazumi Hattori and Hyun Song Shin Monthly Changes Monthly changes in interest differential explain fluctuations in carry trade -60 -40 -20 0 20 40 60 -0.4 -0.2 0 0.2 0.4 0.6 Monthly change in net interoffice accounts (10 billion yen) M on th ly c ha ng e in in te re st ra te d iff er en tia l 23 The Broad Yen Carry Trade Masazumi Hattori and Hyun Song Shin Global Spillover of Monetary Policy Two-way flow: • Role of yen liquidity in fueling global balance sheets • Impact of credit crisis and contracting balance sheets on yen appreciation and Japanese deflation 24