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Investors are getting the yen right for the wrong reasons

Renewed murmurs of additional tweaks to the Bank of Japan’s (BoJ) Yield Curve Control (YCC) policy are giving further impetus to the yen’s recent rally. Though we forecast the yen to strengthen against the dollar this year, that forecast is driven mainly by our expectation that bond yield differentials will shift in favour of Japan and a view that the yen is at this point significantly undervalued.

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