Yen Ignores Regional Crash, BoJ Meeting Looms Large

Japan's Yen has been surprisingly resilient in the face of a regional equity crash. On Tuesday, the currency traded just under 164.00 against the US Dollar, marginally weaker on the day but within a narrow band around its floor at 163.50.

The unusual calm is all the more remarkable given that the Yen is supposed to be bought when Asia breaks down, and yet it barely budged as markets across the region suffered significant losses. Korea's benchmark index fell nearly 11%, triggering its eighth circuit breaker of the year, while Japan's own benchmark dropped nearly 4%.

According to analysts, the Yen has stopped trading as a safe-haven currency and is now purely the funding leg of a carry position that keeps getting cheaper to hold. This means that investors are not buying the Yen for its supposed stability but rather because it's cheap to borrow against.

The Bank of Japan meets on Friday, with many expecting no change in interest rates despite a recent decline in inflation. However, some analysts warn that this could be a recipe for disaster, as the BoJ's ultra-loose monetary policy has already caused the Yen to depreciate against its main currency peers.