Leading Japan to Possibly Become a “Black Swan”

The Bank of Korea Monetary Policy Committee warned that the radioactive substances leaking from the Japanese nuclear facility may become a “black swan,” prompting a Yen carry trade.

On August 27, The Bank of Korea disclosed the minutes from the 15th Monetary Board meeting held on August 8 showing records of a Monetary Board representative’s comment, which reads, “Yen carry trade may become very active as the global economy recovers and the exit plan for major nations takes place,” and added, “Besides the global economic market changes, the nuclear leak can become a black swan, additionally impacting the Japanese economy.” A black swan is an event that has a low probability of happening, but can cause a tremendous amount of shock and impact once it does.

This representative also emphasized, “[The Japanese] government has the highest level of national debt in the world, yet continues its home bias tendency of local businesses and individuals holding these loans. This can become a huge problem if people’s faith in Japan or the Japanese economy itself breaks due to the radioactivity issues,” and added, “The movements in both stock investments and direct investments of Japanese funds should be watched carefully.”