Since October 21st, the Japanese currency experienced a major appreciation against the greenback: +10% as of December 2nd. Chief among the drivers behind this turnaround were the general shift in market expectations towards less aggressive Fed hikes combined to recent indications of Covid restrictions easing from China. However, these events could hardly be seen as sufficient to support a true yen pivot of their own, as least not without concrete signs that the Japanese central bank ought to change its trajectory and align with other countries in the global tightening cycle.
H2O-AM-MacroNote-Can-the-Bank-of-Japan-afford-to-wait-and-seeThinkMacro Podcast : Episode 1
After decades of US economic exceptionalism, driven by consumption, innovation, and financial dominance, cracks are appearing in the model. The return of inflation is constraining the Fed in its ability to sufficiently ease financial conditions in a downturn, and the US Treasury in its capacity to stimulate the economy without triggering a negative reaction from investors.