Risk aversion and volatility is the main theme across the financial markets and for that reason carry trades should continue to suffer. We have often said that three conditions need to be met for carry trades to thrive (low volatility, strong risk appetite and global monetary tightening) and unfortunately, the current market environment is veering further and further away from that description. Like the ECB, it is unlikely that the BoJ will step in to stop the USD/JPY’s slide before it falls below 95. The Japanese have expressed concerns about disorderly movements, but since their last intervention in 2004, their top priority has been to convince China to revalue their currency. They are not likely to be willing to risk the past 4 year's efforts 3 weeks before the finance minister's meeting in Washington DC and 4 months before the G7 meeting in Japan.