Have you noticed the weakness in the Japanese Yen? It's been getting hammered. No surprise of course, the bank of Japan has a completely different goal when it comes to inflation. Japan struggled with deflation for so long that they're absolutely buzzing now that they've seen some inflation. For perspective, much of the world has seen inflation rise to 8-10 percent while Japan is rocking with a mere 2.6 percent inflation. Japan's focus still sits on keeping interest rates extremely low while the US 10-year yield has been climbing above 3 percent. This makes the dollar-denominated assets a lot more attractive which means money is flowing out of Japan and into the US (and other countries).
However, we've been nearing a rather historical level in Yen weakness. The chart below is an equal weighted index of the Japanese Yen against the biggest currencies: AUD, CAD, CHF, EUR, GBP, NZD, and USD.
It's a big moment for the Yen, if the US 10-year starts heading lower we could see the Japanese Yen recover and create some interesting opportunities in the currency markets. But, it's also a huge moment for the US 10-year. How awesome would it be if it started reversing here? Below you can see the inverse correlation between the EQ Japanese Yen index and the US 10-year yield (inverted for easier viewing).
