10-Q: Invesco CurrencyShares Japanese Yen Trust Reports First Quarter 2024 Results Amidst Yen Volatility

The Invesco CurrencyShares Japanese Yen Trust reported its financial results for the quarter ended March 31, 2024, noting a net comprehensive loss impacted by market volatility and a weakening Japanese Yen.

Summary

• The Invesco CurrencyShares Japanese Yen Trust is a grantor trust that aims to reflect the price of the Japanese Yen in U.S. Dollars.
• The Trust's primary assets are Japanese Yen deposits held at JPMorgan Chase Bank, N.A., London Branch.
• For the quarter ended March 31, 2024, the Trust reported a net comprehensive loss of $460,972, compared to a loss of $338,608 for the same period in 2023.
• The loss was primarily due to the Sponsor's fee and interest expense on currency deposits, which exceeded any interest income.
• The Trust's assets increased to $342,767,358 as of March 31, 2024, from $312,587,509 at the end of 2023, mainly due to an increase in Japanese Yen deposits.
• The number of outstanding redeemable capital shares increased from 4,750,000 to 5,600,000 during the quarter.
• The Japanese Yen weakened against the U.S. Dollar during the quarter, reaching its weakest level in nearly 34 years.
• The Trust did not make any distributions during the quarter ended March 31, 2024.

Sentiment

Score: 3

Explanation: The sentiment is negative due to the reported net loss, the weakening of the Japanese Yen, and the negative interest rate. While the asset base grew, the overall financial performance was worse than the previous year.

Positives

• The Trust's assets increased to $342,767,358 from $312,587,509 at the end of 2023, indicating growth in holdings.
• The number of outstanding redeemable capital shares increased, suggesting increased investor interest.

Negatives

• The Trust incurred a net comprehensive loss of $460,972 for the quarter, which is worse than the $338,608 loss in the same period last year.
• The Japanese Yen weakened significantly against the U.S. Dollar, negatively impacting the Trust's value.
• The interest rate on the primary deposit account was negative at -0.20%, contributing to the loss.
• The Trust did not make any distributions during the quarter, which may be disappointing for investors seeking income.

Risks

• The Trust is subject to concentration risk as all of its assets are in Japanese Yen, making it vulnerable to fluctuations in the Yen/USD exchange rate.
• A decline in the Japanese Yen to USD exchange rate will adversely affect the value of the Shares.
• The Trust's assets are held by a single financial institution, JPMorgan Chase Bank, N.A., London Branch, which increases the potential for loss if the Depository becomes insolvent.
• The Trust is exposed to market volatility, including fluctuations in the Japanese Yen/USD exchange rate and changes in interest rates.

Future Outlook

The report does not provide specific forward-looking statements or guidance, but it notes that the Trust's performance is subject to fluctuations in the Japanese Yen/USD exchange rate and changes in interest rates.

Management Comments

• The management of the Sponsor concluded that the Trust's disclosure controls and procedures were effective.
• The Sponsor is not aware of any known trends, demands, commitments, events or uncertainties that will result in, or are reasonably likely to result in, material changes to the Trusts liquidity and capital resources needs.

Industry Context

This report reflects the performance of a currency-based exchange-traded fund (ETF) during a period of significant currency volatility, particularly in the Japanese Yen market. The performance is directly tied to the Yen/USD exchange rate and interest rates, which are influenced by global economic and political factors.

Comparison to Industry Standards

• The Invesco CurrencyShares Japanese Yen Trust (FXY) is comparable to other currency ETFs that track the value of a specific currency against the US dollar, such as the CurrencyShares Euro Trust (FXE) or the Invesco CurrencyShares British Pound Sterling Trust (FXB).
• Unlike equity ETFs, currency ETFs do not have earnings or revenue in the traditional sense, their performance is directly tied to the exchange rate of the underlying currency.
• The negative interest rate on the Japanese Yen deposits is a unique factor that impacts the Trust's performance, which is not common in other currency ETFs that track currencies with positive interest rates.
• The Trust's performance is also impacted by the Sponsor's fee, which is a standard expense for ETFs, but the specific rate of 0.40% should be compared to other similar currency ETFs to assess its competitiveness.

Related Party Transactions

• The Trust pays the Sponsor, Invesco Specialized Products, LLC, a Sponsor's fee, which accrues daily at an annual nominal rate of 0.40% of the Japanese Yen in the Trust.

Stakeholder Impact

• Shareholders experienced a loss in value due to the weakening of the Japanese Yen and the Trust's net loss.
• Shareholders did not receive any distributions during the quarter.
• Authorized Participants were able to create and redeem Baskets of Shares, which impacts the Trust's liquidity and share count.

Key Dates

Keywords

Japanese Yen, Currency Trust, Invesco, FXY, Exchange Rate, Net Asset Value, Interest Rate, Financial Results, Grantor Trust