in the coming week, we will see huge volatility for the yen, as the states buys more yen.

for decades, usd/jpy largely followed the us–japan yield gap.

that relationship weakened after april 2025 as trade-war volatility made carry trades less attractive even with wide rate differentials.

japan is now being priced through a more complicated mix of fiscal credibility, boj normalization, inflation and capital flows.

- japanese yields are rising as inflation, wages and expectations normalize.
- the boj still owns roughly half of outstanding jgbs, while its purchases are slowing.
- that means higher rates increasingly translate into a real fiscal cost rather than just monetary-policy normalization.

at the same time, corporate japan looks structurally healthier than sovereign japan.

profits are strong, shareholder activism has surged, foreign ownership is around one-third of the equity market, and large caps have materially rerated.

that creates a divergence: bullish corporate japan, more cautious on the yen and japanese duration.

there is also an important counterpoint to the fiscal-bear case.

japan still has the world’s largest positive net international investment position and enormous foreign asset holdings. so this is not a conventional external funding crisis.

https://x.com/arndxt_xo/status/2083937243778154750