Eurodollar University You Won’t Believe What Just Happened in Japan
Dec 7, 2025
The yen's dramatic decline has economists scratching their heads, defying typical predictions. Recent reports show a sharp drop in Japanese household spending, challenging claims that wage gains would revive demand. Instead of supporting the yen, higher yields on government bonds have perplexingly pushed it lower. Tokyo's blame on speculators reveals a deeper misunderstanding of market dynamics. Ultimately, the health of Japan's households and the global economy strongly dictate the yen's fate.
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Yen Decline Reflects Real Fundamentals
- The yen's decline is consistent with deeper fundamentals, not mysterious speculation.
- Japanese household weakness and BOJ actions explain JPY's move more than textbook interest-rate logic.
Wage Gains Didn't Unlock Consumer Surge
- BOJ centered its inflation theory on pent-up household demand from wage gains.
- In reality those nominal pay rises don't keep up with supply-shock price increases, leaving households worse off.
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