We have noted that the current environment should continue to see interest in carry trade strategies – where the Japanese Yen scores poorly. However, USD/JPY looks overvalued relative to the terms of trade story – which is much better for the Yen than a year ago.

In addition, there is still the risk that the Bank of Japan surprises on 16 June by further normalising its Yield Curve Control policy. That would be a Yen positive. And thus it would not be a surprise to see speculator investors trying to re-position short USD/JPY above 140 – even if such a strategy has already proved painful this year.