USD/JPY
Updated
What it is
USD/JPY is the exchange rate between the U.S. dollar and Japanese yen, one of the world's most heavily traded currency pairs and the funding leg of the "yen carry trade," in which investors borrow cheap yen to buy higher-yielding dollar assets. The trade's profitability depends on the interest-rate gap between the Federal Reserve and the Bank of Japan.
Why it matters lately
The yen hit a roughly 40-year low near 164 per dollar in July 2026, prompting Japanese authorities to intervene and buy yen, which briefly pulled USD/JPY below 158. The Bank of Japan had raised its policy rate to 1.0% on June 16, 2026 — the highest since 1995, driven partly by Middle East energy-cost inflation from the Iran war — and went on to raise it again a quarter point to 1.25% on September 18, 2026, a 31-year high, though a sizeable gap versus the Fed's 3.75-4.00% rate after the Fed's own September 16, 2026 hike kept carry-trade and intervention risk in focus.
Asymmetric Analytics view
Inference (AA): USD/JPY and the carry trade are ELSI's bridge between U.S. rate policy and Japanese capital flows, a channel that can transmit Fed hikes into sudden yen-funded deleveraging of risk assets.