USD/JPY is a Forex pair that has a considerable history. It represents what was once the world’s two largest economies. But, both the US and Japan have been beset by stagnant economies amidst unprecedented monetary stimulus. Given this extreme accommodation from both the Federal Reserve and the Bank of Japan, central bank announcements have become the key driver for the pair, along with US Treasury Yields.
The Bank of Japan went to negative rates in 2016, and this has a large bearing on how the JPY trades, generally speaking. Given the negative rate, it makes the currency especially attractive as a funding currency for carry trades. When in good economic times, this can be an attractive, low-risk strategy for hedge funds and this can lead to considerable Yen-weakness. But, during times of economic duress, those carry trades become suddenly unattractive, as the prospect of principal loss outweighs that of interest rate differentials, and Yen strength can be a very aggressive theme to be working with.