Hi.  I will work through an example for you.  In most Western economies, money borrowed to invest is tax deductible.  In other words, you are only taxed on net profits associated with a business or investment venture such as a 'carry trade' in assets, cash, bonds, or commodities.

So let's say the hypothetical 'carry trader', as typically depicted in the financial media, is borrowing Yen at 0%, and investing in US treasuries or overnight repos at 5.25%.  Sounds like a profitable trade, right?  Read on.

Now, consider that said trader pays a marginal income tax rate of 40%.  And consider that Japan has been in deflation for the past number of years, at deflationary rate of -1%.  In the same time period, US inflation has been running at roughly 2.5%.

The 'real' cost after-tax cost of Yen = nominal after-tax cost - rate of inflation.
The 'real' return on USD assets = nominal after-tax returns - rate of inflation.

So, for the Yen borrowing, the calculation is 0% * (1-40%) = 0% - (-1%) = 1%
And for the USD investment = 5.25% (1-40%) = 3.15% - 2.5% = 0.65%

So the real rate of return on USD investment is 0.65%, while the real cost of Yen borrowing is 1%.  Since the real cost of Yen borrowing exceeds the real return on USD investment, a so-called 'carry trade' should not have an expectation of profit.

Hedge funds and other institutional players are usually intelligent enough not to engage in activities that do not have expectations of profit.

Therefore, it can be argued that all the talk in the financial 'media' or even in the 'Economist' about a so-called profitable 'carry trade' is complete nonsense.  It is true that there might be some speculators who have placed (and done well with) bets against the Yen in recent years since the bubble burst in the 90s, but to confuse such with a profitable 'carry trade' defies logic.