For most of 2022, the Bank of Japan was maintaining yield curve control (YCC) by targeting a band of +/- 0.25% around zero for the yields of Japanese Government Bonds (JGBs) up 10-years (long-term interest rates). In December 2022, the Bank of Japan unexpectedly changed the band to +/- 0.50%, causing long-term interest rates to rise.

Assume that an investor based in Japan holds US equities and bonds denominated in US dollars, but has payment obligations in Japanese yen. How is the investor exposed to currency risk? How can the investor described hedge themselves against adverse movements in the exchange rate?