I suspect as the Japanese Carry trade is pressured, that there will be an effort made by institutions to convert to AUD in anticipation of Australian Interest Rates potentially rising above US Interest Rates, this would revive the more traditional Australian Carry Trade and serve to reduce the downwards pressure put on the Japanese carry trade while also reducing their overall leverage and should allow them to prolong the Bull Market in equities at least until the spring. Meantime the conversion to AUD should Temporarily push the value of the AUD up higher and given how much leverage would be going from JPY to AUD, I'd suspect the rise we see in AUD to be a bit on the extreme side which could lead to us very quickly seeing AUDJPY reach the more macro Fibonacci retraces between 139 JPY to 191.567 JPY.
Very interesting! Was the carry trade the reason the AUS200 outperformed SPX after the dot-com bubble? Australian equities should run while real estate prices fall in this scenario - if it goes on long enough.
Either way, it looks like the Nikkei must make a new ATH before any change in Japan's interest rate policy.
RizeSenpai
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@it_will_fluctuate, Interesting observation, there might be a bit of a connection there between the AUS200's over-performance of the SPX during that time, though I am unsure. However, it certainly will put negative pressure on real estate as the switch to AUD will likely come with higher interest rates in Australia and therefore lower real estate prices in a major market while at the same time we will see deleveraging of the riskier REIT positions in the US and China while using equities as a sorta hedge to ease off the risks before ultimately resulting in a crash in equities in the most over-leveraged sectors but likely not before what I expect to be a slow grind up for the upcoming few months during this transitionary period.
Either way, it looks like the Nikkei must make a new ATH before any change in Japan's interest rate policy.