I decided to take a closer look at iShares MSCI Japan Index (EWJ) ETF today because of the "carry trade" issue. Investors of the past three years made a good return investing in EWJ. That's probably due to the carry trade firing up the Japanese export machine. This is good news for the Japanese people as they start to claw their way back from a decade long recession.
My long term outlook for the EWJ is a bit negative though, even if the odds are in our favor from the Monte Carlo Simulation. The Yen will likely appreciate over time as the BOJ raises rates. This will ultimately slow down the export machine and cause EWJ to take a hit. When this will happen is anyone's guess but based on my experience we'll know when the carry trade unwinds in a hurry!
What would Soros do? He'd probably be short the USDJPY pair right now, I know I would if I had the capital to stick it out.