The David Lin Report · Thursday, August 6, 2026
David Lin highlights that typically, currency exchange rates track interest rate differentials, but this has not fully explained the yen's depreciation in 2024, even as Japanese long-term yields have risen. Hanke counters that focusing on 30-year yields is misleading, as hedge funds are unlikely to borrow at such long durations, suggesting shorter-term rates are more relevant to carry trade dynamics.
“Now, I want to show you something else because typically, uh, currencies track interest rate differentials.”
“That doesn't, I mean, when when that interest rate moves up even faster than the US interest rate, then an economic theory tell us that the yen would stop depreciating and go up.”
“You've got a 30-year. You think the hedge funds are borrowing money at 30 years duration? I mean, you must be kidding. You've got to get something a lot shorter than that.”