The recent sell-off in long-duration U.S. bonds has taken the wind out of yen's sails, with yen crosses pushing to new rally highs and USDJPY rising to three-week highs. However, the yen's decline is increasingly at odds with its fundamental drivers and we expect double-digit gains in the currency over the coming 12-24 months.
USDJPY Vs. U.S. 10-Year Bond Yield
Source: Bloomberg
Real Yield Spreads Increasingly Yen-Positive
The yen typically performs poorly during periods of rising U.S. bond yields as this tends to increase the spread of U.S. over Japanese yields given that the BOJ