Why has JPY lost its position to USD?

Hi guys,

why has USD become a better fueling currency than JPY for carry trade. I understand the reason why USD is now a recessive currency in carry trade, because of its low interest rates. However, I dont understand why JPY isnt a better currency to sell during carry trade than USD, espically when Japan still has a lower interest rate than that of the US. The Yen use to move much more smoothly than the dollar versus other currency back in the days. Now its the other way around. Why? Does it have to do with political regime in Japan now?

here's a couple of ideas.

1) as you said market participants may be waiting for the new political regime to settle in and see what kind of policy changes they will make.

2) the cds price of jgb's has been shooting up lately - a lot of speculation on how sustainable the japanese debt/gdp level is and possible outcomes of policy changes or govn't intervention.

3) generally speaking, some market participants see global recessions at first in - first out...the U.S. was the hardest hit, and according to a lot of media releases they are coming out of it first ...buffet has been very vocal with his bets towards a recovery, i think jpmorgan was quoted by bloomberg that BOA will double its share price by end 2011. the s&p500 has retraced 62% of its losses since mid 2008. --- though i personally don't think we're out of the woods yet, there may be a lot of market players that do and see the USD as a safer bet than yen.