- The Japanese yen looks set for equity-like gains over the next 12-24 months after recent weakness has left the currency deeply undervalued relative to fair value.
- Despite the recent rise in U.S. real yields, USDJPY remains far higher than real bond yield spreads suggest it should. Based on historical correlations, USDJPY should be trading around 100.
- The Japanese yen is also remarkably cheap in real effective terms thanks to FX gains for Japan's main trading partners and Japan's much lower inflation rate.
- The USDJPY chart pattern suggests that the trend of lower highs since the 2015 peak remains intact. The pair is currently testing the 110 level and a close below here would suggest that a reversal pattern is taking place.
For further details see:
The Yen Is Priced For Equity-Like Returns