JPY: Structurally weak, cyclically blessed

Structural headwinds are strong for the yen, setting a fundamental background for the currency to stay weak. Yet a recessionary environment is a cyclical blessing – peaking growth and rates prove that the JPY is among the cleanest diversifiers – and officials may have lost their appetite for currency devaluation.

Two years after the first Covid-19 outbreak in developed markets, the JPY is among the clear losers globally. With respect to December 2020 – when the new US administration was coming into power – the currency has weakened against all major trading partners with few exceptions, including the TRY, HUF and ARS.

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