The Problem With the Yen (JPY) Is That It Only Works
as a long in a couple of ways. Whereas other currencies, like the AUD, the CAD, and the CHF work several ways. Essentially, the main problem for the JPY long position is the nefarious BOJ, and frankly, an entire culture that is not ready to permit a change in a multi-decade paradigm defined by a weak currency.
The JPY works as a long of course as a disaster hedge. Also, on a macro-growth level, the JPY could potentially work as a proxy for pan-Asian revalution.
On this final point we see the tragedy of the JPY. For it is, indeed, a wonderful proxy for pan-Asian currency revaluation. If only the BOJ and Japanese Culture would permit it. At some point in the future, I am sure this will happen.
Even the JPY as a disaster-hedge has problems, imo. There have been some big shifts in the carry trade this decade and in the last two years. The JPY Carry-Trade is not quite what it used to be. Oh it's still there. No question. But what's going to happen when USA FF get towards 3.00%? The USD as a carry trade is going to return.
When I look at this JPY move today, I have to wonder if the Hand of the BOJ is in the market. The lesson for Central Banks is that you can never really get any heavy lifting done on currency manipulation, unless, you pair the action with a catalyst. My only assertion here is that today would be a great day for the BOJ to get Bang, for their JPY. If they wanted to halt the recent JPY march higher, i.e., today is the day to pile on the pig pile.
Finally, the JPY is not backed by any natural resources. So maybe it rises as a disaster hedge, and maybe it rises on the back of pan Asian reval. But they have no oil. And going forward, I can't see getting excited about a currency not backed by any oil or NG. (Hence the CAD and AUD, which are also backed by rock-solid Government Balance Sheets. The CAD is Oil and the AUD is NG, Coal and Uranium).
Anyway, today is a day for newbie JPY longs to get a taste of the other side of the equation.
Gregor |
