jacksparrow

The profit is AFTER paying the interest cost. You are double counting if you compare your profit to your loan. Step 1 we are paying 1.02^(90/360) = loan +interest.
So the profit above is net the interest cost.

The other point. Remember, we didn't put up 1000 yen (see first rule of arbs in prev post). So we earned 4.8562 on 0 equity capital. That's the fundamental of arbitrage. You have zero equity to start and end up with profit. We borrowed, so in essence our return is infinite or limited by our ability to borrow.