Yen Fragile Five Membership Risks Losses Backfiring

Japan’s encouragement of yen depreciation to boost the economy threatens to backfire by making the country dependent on foreign investors for funding.

That’s the very same economic weakness that prompted Morgan Stanley to describe emerging-market currencies from South Africa’s rand to Turkey’s lira last year as the “fragile five.” While the yen is still regarded by investors as a safer bet than any of those developing currencies, the prospect of 33 years of current-account surpluses coming to an end may dent its appeal as a haven, according to Brown Brothers Harriman & Co.