It is notable that lower US yields/narrower US-Japan interest rate differentials are not having any major impact on USD/JPY. The US/Japan 10Y spread has fallen around 50 bps over the past three weeks to reach levels last seen in August when USD/JPY was trading nearer 145. 

Spot is knocking on the door of recent highs but Fair Value based on spreads, equity returns and terms of trade (weaker crude oil prices are helping boost Japan’s still soft terms of trade) suggest the USD is quite significantly overvalued and should be trading closer to 144.50.