Rolling coverage of the latest and economic news, as US sells 30-year bonds at highest borrowing costs since 2001
Looking back at the yen…Professor Costas Milas of the University of Liverpool Management School has calculated that Japan’s currency is undervalued by over 20%.
Given that, would a September interest rate rise (see earlier post) stabilise the yen, following the recent US-Japan intervention?
The critical question to ask here is how weak the Japanese yen is. My own estimates (Chart below) suggest that the yen is currently around 21 per cent undervalued relative to its economic fundamentals (or equilibrium). What are the economic fundamentals?
1) The 10-year yield in Japan relative to the 10-year yield in the US.
