Japanese yen may weaken as the global economy rebounds encouraging the country’s investors to look forward for higher yielding assets abroad reducing their demand for the national currency, claim the analysts at Daiwa SB Investments Ltd.

The pressure on yen is created due to the widening differential between yields on Treasuries and Japanese government bonds. Investors begin returning to the carry trades borrowing in Japan where the yields are low in order to buy assets in higher-returning countries.

In 2011 carry trades with yen as a funding currency brought the profit of 23.8%, while from dollar-funded trades investors gained only 2.8%. Rising popularity of the yen-carry trades means that the Japanese currency to be sold.

According to the data from Commodity Futures Trading Commission, for the first time since June futures traders are betting on a drop in yen versus dollar – net shorts for yen were 18,548 February 15, compared with net longs of 36,731 a week earlier.

So, the general trend has reversed from what we’ve seen at the beginning of 2010 when investors were looking for a refuge from Europe’s sovereign-debt crisis propelled yen to 15-year maximum versus the dollar.

According to the Bloomberg’s data, yen lost 8.1% from its August maximum versus the basket of it 9 developed-nation counterparts. In February the pair USD/JPY has gained 1.3%. Economists surveyed by Bloomberg News claim that yen will fall to 86 per dollar by the end of the second quarter and 90 by the end of the year. Currency strategists at Daiwa SB believe that the pair USD/JPY has already hit its lowest point and is now on its way up.

Yen’s depreciation will be very positive for Japanese exporters and may help the Prime Minister Naoto Kan to improve his approval rating that declines last month to 17.8%.