Yen Carry Trade Explained

The speaker walks through the definition of the yen carry trade and takes you through a real example of how it works.  The yen carry trade profits off of the positive differential between the interest rates associated with the US dollar and the interest rate associated with the Japanese Yen.  Basically, by purchasing the USD/JPY, traders were earning an almost "risk free" return due to the huge spread between interest rates. 

The chink in the armor lies in the exchange rates.  If the exchange rates fluctuate wildly, this could adversely affect your profit and force you to liquidate your position.