Does anyone know why the stock market drops when the yen rises?

Question

Everyone says it's attributed to the carry trade collapse. I just don't see a fundamental correlation to that. Are a majority of stock buyers also carry trade investors?

Answer 1

I assume you are talking about non-Japanese markets. Example: US stock markets are denominated in US dollars. If the yen rises, that means that a Japanese investor is losing money on the currency translation to get into and out of the stock, even if the stock is going up, in dollar terms. A lot of money in the world's stock markets comes from Japanese insurance companies and pension funds.