The Yen is affected by two factors if the monetary policy reversal will once again fails to materialize: short-term it suffers because the carry disadvantage is creating pressure; and long-term because there is a risk that inflation will become so ingrained that monetary policy will be unable to control it without considerable fiscal collateral damage.

The risk that is putting pressure on the Yen even at the current weak levels is: as long as the current situation persists it is unclear whether ‘equilibrium’ JPY exchange rates exist any longer or whether there is a risk of never-ending depreciation/inflation spiral.