As the euro-zone debt crisis continues to send shockwaves through the financial markets, it is ironic that the best performing of the world’s major currencies so far this year has been the yen. After all, Japan’s gross sovereign debt is larger than that of all the countries in the euro-zone put together, even though her economy is less than half as big. There are plenty of things in the Japanese currency’s favour, such as significant net international assets and a broad and diversified economy. But a sanctuary from fiscal stress is not one of them. We continue to expect the yen to depreciate gradually against the dollar, to 85 by the end of this year and to 90 by end-2012.