The yen is currently trading around 155 per US dollar, reaching its highest level in several decades, within a range of 80 to 160. This growing imbalance increases the likelihood of a sudden reversal in the yen carry trade strategy that investors have built up over the years. Japan's economy is walking a thin line of contradictions, most notably manifested in the extreme weakness of the yen, which is now far from its fair value consistent with the fundamentals of the economy. Since the beginning of 2022, when it was close to 115, the Japanese currency has experienced a sharp fall, driven primarily by the huge interest rate differential between Japan and the United States.
