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Writer's pictureRosbel Durán

💹Yen Weakness In 3 Charts

Of course, it takes more than three charts and a brief paragraph to fully explain why USD/JPY trades shy of 130.0. We will keep it simple here:

  • Yield differentials: U.S. Tsy - JGB 2y spread stands at 270bps, there's no G10 currency at this tenor standing this far from the 2y U.S. note. Only the Swiss curve stands close in the 2y space, but the spread is retraced moving into the long end

  • Monetary policy: As central banks around the world started tightening their respective policies, the BoJ stands still, its balance sheet represents 134% of Japan GDP, this is chunky when compared to the Fed's 38%.

  • Trade: The Japanese economy is a net importer of goods and ranks as the largest importer of energy in the G10. The economy is not favored by the current high energy prices, and a bounce from last year's variant disruptions is less likely if consumers are pressured by costs.



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