Can Economic Policy Uncertainty Explain Changes in the Yen/US Dollar Risk Premium?

Can Economic Policy Uncertainty Explain Changes in the Yen/US Dollar Risk Premium? | Research Square window.SnipcartSettings = { analytics: { enabled: false } }; (function() { var accessVector = localStorage.getItem('access_vector') || ''; window.dataLayer = window.dataLayer || []; if (accessVector) { window.dataLayer.push({ user: { profile: { profileInfo: { snid: accessVector } } } }); } })(); (function(w,d,s,l,i){w[l]=w[l]||[];w[l].push({'gtm.start':new Date().getTime(),event:'gtm.js'});var f=d.getElementsByTagName(s)[0],j=d.createElement(s),dl=l!='dataLayer'?'&l='+l:'';j.async=true;j.src='https://www.googletagmanager.com/gtm.js?id='+i+dl;f.parentNode.insertBefore(j,f);})(window,document,'script','dataLayer','GTM-K279D39R'); Browse Preprints In Review Journals COVID-19 Preprints AJE Video Bytes Research Tools Research Promotion AJE Professional Editing AJE Rubriq About Preprint Platform In Review Editorial Policies Our Team Advisory Board Help Center Sign In Submit a Preprint Cite Share Download PDF Research Article Can Economic Policy Uncertainty Explain Changes in the Yen/US Dollar Risk Premium? Wenti Du, Khine S Kyaw, Eric J Pentecost This is a preprint; it has not been peer reviewed by a journal. https://doi.org/ 10.21203/rs.3.rs-7935262/v1 This work is licensed under a CC BY 4.0 License Status: Under Revision Version 1 posted 5 You are reading this latest preprint version Abstract The risk premium is the additional return above uncovered interest rate parity risk-averse foreign investors require to hold domestic assets. This premium is well-known to vary over time, although an economic explanation of this variation has largely proved elusive. In this paper, we propose a disaggregated measures of economic policy uncertainty as alternative economic explanations for the risk premium. In particular, we find that monetary policy uncertainty in both Japan and the US contribute significantly to movements in the risk premium on the Japanese yen since the mid-1990s. JEL Classification Nos: G14, G15, F36 Risk premium policy uncertainty Japanese yen/US dollar rate connectedness Full Text Cite Share Download PDF Status: Under Revision Version 1 posted Editorial decision: Revisions needed 08 Feb, 2026 Reviewers agreed at journal 19 Nov, 2025 Reviewers invited by journal 02 Nov, 2025 Editor assigned by journal 24 Oct, 2025 First submitted to journal 23 Oct, 2025 You are reading this latest preprint version Research Square lets you share your work early, gain feedback from the community, and start making changes to your manuscript prior to peer review in a journal. As a division of Research Square Company, we’re committed to making research communication faster, fairer, and more useful. We do this by developing innovative software and high quality services for the global research community. Our growing team is made up of researchers and industry professionals working together to solve the most critical problems facing scientific publishing. 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