Instances like negative oil prices, 30-year USD OIS rates dipping below 0.50%, and GameStop shares surging past $100 highlight moments when you glance at a screen and can confidently assert, "This price is wrong." Of course, whether such bold judgments are accurate can only be confirmed in hindsight. Human nature means we tend to remember correct calls more vividly and overlook the incorrect ones.

Claiming that the USD/JPY exchange rate is incorrect is easy, but that doesn't reveal where the true fair value lies. The OECD's purchasing power parity-based estimate pegs the fair value for USD/JPY at 97. In contrast, a model adjusted for terms of trade suggests a more reasonable level around 125. This still indicates the current USD/JPY is overvalued. However, as the chart shows, such valuation deviations can endure for extended periods.

The current overvaluation of USD/JPY has lasted less than half the duration of its undervaluation during and after the global financial crisis, and the magnitude of the deviation is only half of that period. Tuesday's Macro Viewer column and podcast discussed yen valuations and the broader topic of asserting that an asset's "price is wrong."