Yen resilience unlikely to last

Sober Look noted that despite the large quantitative easing being implemented by the Bank of Japan, the yen has remained steady against the US dollar so far in 2015 and has even risen against a trade-weighted yen index.

Part of the reason for this is that recent US economic data have been weaker than expected.

Indeed, Bloomberg noted that its economic surprise index for the US has fallen to the lowest level since the financial crisis.

Nevertheless, Sober Look thinks that the yen is unlikely to maintain its resilience for long.

In the long run however, further yen weakness seems inevitable. The reason has to do with the sheer relative size of Japan's quantitative easing... Furthermore, given the scope and size of this program, it is unclear if the Bank of Japan can ever effectively exit it without a massive disruption to the nation's economy...