* Looking at the financial markets during the yen depreciation of 2022, if asked whether Wall Street was conducting large-scale counter-trading to neutralize the speculative behavior of clients leaning into the yen carry trade, the answer is no. Rather, it should be said that their own speculative actions were the primary driver behind the exchange rate swinging so far in opposition to relative purchasing power parity.
* Considering the inflation rate differential between Japan and the U.S. at the time, the USD/JPY exchange rate should have moved toward a stronger yen in the long term in accordance with the real-demand principle (relative purchasing power parity theory), but it did not. In other words, the "neutralizing action" that Wall Street uses as a rationale for its own large-scale dealing was hardly effective.
* It should be viewed that Wall Street in 2022 was actively participating alongside clients in the anti-social yen carry trade.
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* Looking at the financial markets during the yen depreciation of 2022, if asked whether Wall Street was conducting large-scale counter-trading to neutralize the speculative behavior of clients leaning into the yen carry trade, the answer is no. Rather, it should be said that their own speculative actions were the primary driver behind the exchange rate swinging so far in opposition to relative purchasing power parity.
* Considering the inflation rate differential between Japan and the U.S. at the time, the USD/JPY exchange rate should have moved toward a stronger yen in the long term in accordance with the real-demand principle (relative purchasing power parity theory), but it did not. In other words, the "neutralizing action" that Wall Street uses as a rationale for its own large-scale dealing was hardly effective.
* It should be viewed that Wall Street in 2022 was actively participating alongside clients in the anti-social yen carry trade.
https://gyazo.com/acf660a30129f2faf3bd73ffdd7f8c61