Up until this week, the view on Japan’s economy was decidedly negative. Despite a massive bond-buying program poised to continue expanding, economic growth was looking fairly weak and the policy had failed to stoke inflation. As a result, investors started dumping the currency, which fell hard against the US dollar, sliding 5% between May 13 and June 5 and bottoming out last week after a very solid US jobs report, which boosted the dollar in relative terms.
Then Japan surprised markets with an upward revision of its first-quarter GDP numbers, reviving investor confidence. More importantly, Bank of Japan governor Haruhiko Kuroda told legislators that the yen had probably fallen as much as it could against other major currencies, which sparked a rally. The surge has dissipated a bit since then, but in the meantime the yen took a 1.7% bite out of the greenback (as shown in chart below), showing it has more muscle than skeptics thought.