Alright, so the USDJPY has fallen to 142 in the past few days (JPYHKD ~0.055)

This is basically the lowest since 2023 and has hit the low of the yen-carry unwind fiasco back in Aug2024.

So the big question is – is the weak yen over? Or is this just a temporary setback?

My conclusion is, it should be a temporary setback, and I will lay out the reasons. Will check back at this post in a few months or a year to see how it unfolds.

The main reason for the weak USDJPY – weak DXY

So the dollar has faced selling pressures and basically all currencies, not just the yen, has appreciated against the dollar.

I am honestly not sure why the tariffs could have such effects on the DXY though.

Previously when tariffs were first announced, the countries that faced the new tariffs (canada, mexico) had their currencies depreciated against the dollar, completely opposite of what is going on now.

So anyway I don’t try to dig into the mechanics too much, but I would just ask the question, would it continue to fall?

Will DXY continue to fall?

Without understanding the mechanics exactly, it is hard to predict this one.

But I would think that a significantly weaker dollar isn’t really beneficial to the U.S. administration, and although they’ve said they want a weaker dollar, I would think its slightly weaker not extremely weaker.

Can JXY rise? unlikely

Now on the other hand, since I am not concerned about DXY but more the USDJPY, the question is, can the yen keep appreciating against the USD?

And my answer would be – unlikely.

The dollar’s new found weakness this week clearly has to do with trade.

Supposedly if the US improves its trade deficit, the dollar SHOULD appreciate because less dollars are flowing out from the U.S. (or more dollars are flowing in), creating demand for the USD.

And tariffs should do that so the dollar should have been strengthening on tariffs – weird.

Anyway, the point here I am mostly considering though is, can Japan improve its trade balance going forward?

And my answer is, very unlikely – due to its lack of technological innovation and the dying industries like cars and appliances. On the other hand – software services, AI, smartphones, Japan is really lacking.

Then there is the Japan national debt. 200+% debt to GDP ratio. The only reason that can be sustained is because the yen interest is so low.

When inflation is low, that’s fine because the nominal rate can be low and the real rate is still above 0%.

But with inflation starting to run rampant (probably due to the U.S. exporting its inflation to Japan after 2020), the real rates have fallen to negative quite a while ago.

And with this debt, if BOJ raise rates, the interest payments would demolish the system. Not to mention people and businesses are so used to zero or negative rates, a 2-3% rate would just be unreal at this point.

So the BOJ would have to buy the debt to keep rates low. And that means even more inflation, and even lower real rates – and that of course translates to depreciating currency.

Therefore the conclusion is, the dollar might be weak, but the yen is only going to be weaker. Any weakness in the USDJPY is most likely short lived and the long term trend should push the USDJPY higher and higher.

The Verdict – DXY unsure, JXY continue to fall long term

There is no doubt the dollar is getting weaker.

And I am okay with that since I am fully invested in all non fixed-income assets – gold, bitcoin, US stocks.

So the question is only, if I want to do margin borrowing in USD, or in yen (or both?)

Borrow in USD is good. But borrow in yen is even better.

The rates with yen borrowing is already much lower. And I would only get it at a disadvantage if USDJPY goes into a long term decline. Which is possible, but just quite unlikely in my view.

If USDJPY just stays flat, I am already earning the interest differentials of almost 4% per year at this point.

If USDJPY increase in the long term like I predict, then I will make even more both on the margin and on the quicker decline of the yen.

Let’s revisit this post in a few months or 1-2 years to see how it plays out.

20250421 – Additional Move based on “US triple sale”

So the USD selling pressure continues today.

Gold up +2.02% at this point of writing for today, and BTC up +2.74% despite US stocks falling pre-market (QQQ -1.21%). US10Y price down, yield up +0.67%.

So the trend is clear as day. People are selling US dollars, bonds, and stocks across the board. And I just don’t think the White House or Trump can do anything to completely reverse the damage.

I just have to say it’s due to tariffs although I can’t connect the dots 100% yet.

Also I don’t think this is a short-term movement. It’s a long term trend that was probably in the works for years but the tariffs brought out the monster.

They will probably try very hard to limit or reverse this but I think over the next few years it will just have to get worse (DXY continue to go down, US stocks and bonds getting dumped; US inflation goes up, some of that exported to EU/JP, world inflation goes up, money printer runs wild, etc.)

In any case, I am making 2 more allocation adjustments today:

1 – US stocks -1% (32->30%), bitcoin +1% (23->25%)
(*USD stocks has already fallen to that level in fact, so there is no need to sell. I just won’t buy and take the cash to buy more bitcoin)

2 – JPY shorts -2% (-19->-21%), bitcoin +1% (25->26%), gold +1% (55->56%)
(*Gold has already risen to this level in fact, so there is no need to buy gold. I just wont sell and take the yen margin to buy more bitcoin)

USDJPY has dropped to new low in months pretty much, but I am not too worried because the IMM futures indicating the long yen and short USD position is at record high.

That position still has to unwind at some point and that will contribute to yen weakness.

And despite all this “yen buying”, gold and BTC are still up against yen.

So if USD is getting so weak, there is no way the yen is getting stronger against hard assets. The policies must adjust so that maybe yen will take some of the hit (more QE, no rate hikes) to balance things out.

At the end of the day, I am most bullish on BTC due to reasons I’ve already outlined in a previous post:
https://www.lyt-tech.com/my-new-bullish-ness-for-bitcoin-march-2025/

So this reallocation in reality is all about borrowing more yen to buy bitcoin, which aligns perfectly with my thesis and outlook.