The $USDJPY pair continues its upward trajectory. Is this purely an interest rate differential play, or are there other factors at play that suggest this weakness could persist for a longer period? Trying to understand the structural reasons.
I think you're spot on about the structural reasons. It's not just the rates; the BoJ's overall dovish stance and the current global economic outlook seem to be creating a perfect storm for sustained JPY weakness.
It's mostly rate differentials, but don't discount the BoJ's reluctance to intervene strongly. That indecision just fuels the carry trade.
Could it be partly due to the massive trade deficits Japan has been running? That has to play a role beyond just interest rates.