Weak Yen Fuels Global Stock Bubble, Warns Asset Manager Naomi Fink
The world's financial markets are heavily reliant on the weak yen-induced boom. This is because investors are borrowing cheaply in yen to invest in higher-yielding assets, a practice known as the yen-funded carry trade.
According to Naomi Fink, chief global strategist at Amova Asset Management in Tokyo, the yen is 'carrying the weight of the world's risk tolerance'. She suggests that the currency may remain undervalued until risk appetite, global liquidity conditions or Japanese capital flows begin to shift.
The boom in artificial intelligence stocks is partly driven by this carry trade, but leveraged speculation in stocks funded by yen borrowing is another key factor. This means that financial markets are heavily exposed to a potential correction if interest rates continue to rise.