Mrs. Watanabe Is Giving Cover to the Yen Carry Trade
As long as Japan’s small investors keep investing abroad rather than at home, don’t expect the currency’s weakness to reverse.
Heads or tails: There’s only one winner in the foreign-exchange game.
Photographer: Kiyoshi Ota/Bloomberg
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There’s always a winner and a loser in foreign exchange, and this year the big winners have been those who bet against the Japanese yen. Alone among the big economies, Japan has spent this year redoubling its efforts to fight deflation while everyone else has declared war on inflation. That has had predictable effects. With the Bank of Japan still deliberately holding down 10-year yields (through “yield curve control”) the currency has tanked, and has now hit a 20-year low against the dollar: