The Bank of Japan's recent rate hike doesn't seem to have dented the world's appetite for carry trades.  If anything, the BoJ's signal that it won't changes rates too quickly seems to have added to the financial world's already strong desire to borrow yen to buy other currencies.  

That brings up a question that we discussed extensively two weeks ago -- just how big is the yen carry trade? 

Detecting carry trades can be a bit like detecting planets orbiting a distant star.   Because many carry trades are done off-balance sheet – and even the data for on-balance sheet carry trades has its limits (long lags) – sometimes the presence of large trades needs to be inferred from the wobbles that appear in various financial markets.  Just as the presence of a planet is often detected by the way its gravitational pull leads to wobbles in the light from their star  … 

Right now, I see lots of indirect evidence of the popularity of carry trades.   Large Glacier bond issues and large -- perhaps record large -- foreign positions in the Icelandic Krona.  A strong kiwi.   Strong reserve growth (implying rapid capital inflows) in high carry emerging economies like Brazil, India and Turkey.  The FT's concerns about slow Brazilian growth don't seem to be shared by the markets: Brazil could add close to $10b to its reserves in February alone trying to fight carry trade inflows.  A weak yen and Swiss franc.   

The case that there are big yen-financed carry trades out there doesn’t hinge entirely on the large speculative short position that shows up in the data from the futures exchange.