JPY crosses/USD/JPY

Abe and the Yen: This better be more than just verbal intervention!

USD/JPY has now risen 10 big figures since Mr Abe, whilst still in opposition, signposted his intentions to spend Japan’s way out of deflation. All of this chat obviously depends on the BOJ playing ball, and as yet we haven’t seen any major new policies. In essence, the move from 79 to 89 has been verbal intervention. If the BOJ seems to be showing even the slightest unwillingness to join in the party, then the JPY move will be unwound very sharply.

  1. Jim O’Neill has been going on about Japan for the last few months now, he seems to think this is a big trend change, and is looking for 100-120 in 12-24 months.

    The thing is, I don’t know what sort of action the non-Japanese are expecting from the BOJ.

    A 2% inflation target is a must now, but just having a target doesn’t mean it will get achieved. The BOJ introduced a 1% target last year but that didn’t do much, although it did produce that nice rally in the early months of the year.

    But this time around, exactly how much QE or whatever will the BOJ need to do to satiate the trend? Does QE really help anyway?

    I’ve not read a thing for any Japanese analyst who believes this story.

    Macro side though Japan is running a trade deficit at the moment. In the past any yen cross rally would be hammered down by Japanese exporters, but with importers in control I suppose it has given the yen more room to fall.

    There aren’t many dips, but buying them, such as the one earlier this week, seems to be the best strategy at the moment.

  2. eur/jpy has rallied from 93.50 to 118.50 and more to come.2500 pips for 5 months. 500 pips on average. wow. i think the euro is still underbought and can go to 1.35 this will take eur/jpy to 121 or so.

  3. i guess what abe has done is a slap on the face of bernanke. he was thinking he is the only wise central banker in the world

  4. It’s amazing the credibility that Abe has been shown to have in the market, given that he failed miserably as PM in his first outing. He was the first of 6 Japanese PMs to quit or be voted out after approx 1 year in office. He’s on a roll right now, but can he live up to whatever the expectations are…

    Besides his big talk, all of his fiscal policies are totally back to the past.

    That’s a yen negative I suppose – Abe’s policies are likely going to bring forward the day of reckoning for Japan’s public finances. Coupled with looser monetary policy and perhaps it does make sense that the yen is going down (at least until the new BOJ governor is revealed and shows his/her hand).

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