For the last several years, the behavior of Japan’s yen against the US dollar is near perfectly correlated with the eight-week average of US$ repo fails. From the outside, which means the mainstream, this sounds like one of those nonsensical relationships built up in fevered imagination by superstitious blasphemers. If I go outside three days in a row and it rains each time, this doesn’t mean I control the rain just by leaving my house.
But this JPY-repo connection isn’t some fly-by-night, temporary oddity. It has lasted well more than two years and the association is only getting stronger. With particular emphasis following the last weeks in February, first weeks in March, the yen is now at a multi-decade low while the average of total repo fails at a multi-year high equal only to March 2020 (going back half a decade).
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