Very interesting. I think it makes a lot of sense. How do you think about capital repatriation though? The new PM is a disciple of Abe, but although she can put pressure on the BoJ not to raise rates, can she go as far as convince them to resinstate YCC? If not, the bond market will put a constraint on her willingness to have an expansionary fiscal policy. In that case, is it not possible that a political compromise would be a tight(-ish, not necessarily super tight but at least tighter than now) monetary / loose fiscal policy? In which case the yen would likely appreciate as private and GPIF capital gets repatriated in Japan?
I guess my point is that running Abenomics in the current environment seems difficult? I'm also surprised, especially with Bessent as the Treasury Secretary, that currency was seemingly not a big talking point in the recent trade negotiations (maybe it's too complicated for Trump, Lutnick and the other morons in the team), but does that mean that the US would tolerate the yen weakening again? It just seems very fluid to me. I don't have conviction to put a long yen position on, but I'm a bit tempted to fade the current weakness as a trade.
Even though I disparaged macro thinking - there is a macro way to analyse this. In 80s, 90s and early 2000s, the Americans were worried about Japanese competition and Japanese exports. A weak Yen would have led to trade barriers, so the Japanese agreed to strong yen - particularly when the US was struggling economically.
Now China is the big fear - so a weak Yuan would lead to more trade barriers, if not with the US, with other countries. As Japan is no longer seen as a threat, they can pursue a more mercantilist policy on currency.
On a more realpolitik analysis, perhaps the US sees a weak Yen as a way of attacking Chinese export prowess?
I dont blame you wanting to be long yen - but I think long Japanese equities makes more sense.
it's funny, 40 years in FX and I look at yen and see 200, not 100 in its future. I don't think Trump cares as much about Japan with respect to the yen as he does with respect to driving investment into the US, which naturally will strengthen the dollar.
This post reminds me of the Man calmly eating a kebab meme.
https://x.com/unslic3dBr3ad/status/1975904843605905694
Very interesting. I think it makes a lot of sense. How do you think about capital repatriation though? The new PM is a disciple of Abe, but although she can put pressure on the BoJ not to raise rates, can she go as far as convince them to resinstate YCC? If not, the bond market will put a constraint on her willingness to have an expansionary fiscal policy. In that case, is it not possible that a political compromise would be a tight(-ish, not necessarily super tight but at least tighter than now) monetary / loose fiscal policy? In which case the yen would likely appreciate as private and GPIF capital gets repatriated in Japan?
I guess my point is that running Abenomics in the current environment seems difficult? I'm also surprised, especially with Bessent as the Treasury Secretary, that currency was seemingly not a big talking point in the recent trade negotiations (maybe it's too complicated for Trump, Lutnick and the other morons in the team), but does that mean that the US would tolerate the yen weakening again? It just seems very fluid to me. I don't have conviction to put a long yen position on, but I'm a bit tempted to fade the current weakness as a trade.
Even though I disparaged macro thinking - there is a macro way to analyse this. In 80s, 90s and early 2000s, the Americans were worried about Japanese competition and Japanese exports. A weak Yen would have led to trade barriers, so the Japanese agreed to strong yen - particularly when the US was struggling economically.
Now China is the big fear - so a weak Yuan would lead to more trade barriers, if not with the US, with other countries. As Japan is no longer seen as a threat, they can pursue a more mercantilist policy on currency.
On a more realpolitik analysis, perhaps the US sees a weak Yen as a way of attacking Chinese export prowess?
I dont blame you wanting to be long yen - but I think long Japanese equities makes more sense.
it's funny, 40 years in FX and I look at yen and see 200, not 100 in its future. I don't think Trump cares as much about Japan with respect to the yen as he does with respect to driving investment into the US, which naturally will strengthen the dollar.
Best trade in yen is to visit japan 🇯🇵 🤘
100% agree. Hopefully you saw my post from last year.