This paper examines the available data that may shed light on the
carry trade in Japanese yen. We define an individual or a sector to
be engaged in the carry trade if it has a short position in yen and
a long position in other currencies. The tendency of large yen
movements to be skewed toward appreciations is consistent with the
existence of substantial carry positions, and other evidence from
market prices provides some modest support for an effect from the
carry trade. Data on bank loans and bond holdings by currency
reveal a large apparent yen carry position of the Japanese official
sector and modest carry positions in the Japanese and foreign
banking sectors. The Japanese private non-banking sector has a
large long foreign-currency position, but does not have a short yen
position, and is thus not engaged in the yen carry trade in the
aggregate. However, it is possible that exporters and investors in
Japan use the derivatives markets to hedge some of their long
foreign-currency exposure, with the private non-banking sector
outside of Japan (including most hedge funds) likely to be taking
on most of the associated carry exposure.
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