Is Yen Due for a Fall?

Original Article from Seeking Alpha Dollar Currencies

Paul Stafford submits:

I must admit that I have a hard time maintaining an open mind on the yen. I see so many issues impacting the currency relative to the other G-7 that when good news does happen, I tend to discount it (my own Confirmatory Bias peeking through). So let’s start with my predilection that the Yen is due for a fall, and then try to discredit it.

The fundamentals certainly do give one pause. The central bank rate has been 0.1% for years, and of course gave rise to the Carry Trade. With the recent increases moving short term US interest rates above Japanese rates, a resurgence of the Carry Trade will drive the Yen lower. Other measures of the economy are woeful too. The GDP took the worst fall of all the G-7 last year (-12.7% annualized in March 2009), and monthly change in GDP remains negative, although improved

from a year ago. Amongst the G-7, the budget deficit is third worst (behind the US and UK) at -7.8%.

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