By Alex Frangos/Dow Jones

The yen is back on the path toward weakness, as some old market forces reassert themselves.

Prime Minister Shinzo Abe’s economic plan launched in 2012 — a combination of monetary and fiscal stimulus and long promised pro-growth economic reforms — sent the yen weaker and Japanese stocks soaring. Then in May, indications the Fed will scale back its bond buying programme, plus concerns about whether Abe will be able to follow through on the economic reforms, saw the yen regain strength.

Abenomics was starting to look like previous failed attempts by Japan to shake off its 20-year slump. But chalk up the yen’s reversal to a temporary market digestive process. As a rule of thumb, higher US interest rates attract Japanese yield-hungry investors to the dollar, causing the yen to weaken.

All things being equal, if the Fed is set to tighten policy, and the Bank of Japan is set to loosen, then the dollar should rise against the yen. But when investors dumped Treasurys last month, causing yields to rise in something close to a global bond panic, Japanese investors sold too, according to UBS foreign exchange analyst Gareth Berry.

The fall in prices overwhelmed any yield spread Japanese investors get from owning US bonds. With more than $1tn in Treasurys, the second most after China, Japanese investors have a lot at stake.

Meanwhile, Japanese yields stayed mostly firm, as the BoJ ramped up its bond buying. The sell-off has left the difference between Japanese government bonds and US bonds well above average.

The gap between 2-year bonds, have a spread of 0.26 percentage points, compared to an average of 0.16 the past year. That might not seem like a lot, but Japanese have been starved of a decent yield for years. For 10-year bonds, the difference is more pronounced, 1.8 percentage points, versus 1.1 on average the past year.

Last Friday’s strong US job numbers sent Treasury bond yields higher, providing even more of a gap for Japanese investors to chase.

The yen is now back above 100. The pause in the yen’s weakening shows that Abenomics isn’t a guaranteed success. Yet so long as investors stay comfortable with the Fed’s exit plan, the yen’s road to softness will continue.