A significant component in the big Yen fall of recent months has been the expectation that a new BOJ governor would be installed and that he would introduce significant easing measures. In other words, much of the Yen weakening has happened because of policies which are yet to be implemented, a matter of ‘jumping the gun’ which we traders are well renowned for.
Mr Kuroda starts work next week and the Nikkei reported yesterday that he may introduce some new measures straight away, rather than waiting for the April meeting.
Interestingly also, for the past 48 hours the options market has been reporting a significant increase in the purchasing of downside protection in all of the Yen crosses, but most particularly in USD/JPY.
Now that the fact is about to catch up with the rumour, may we be about to see another significant correction? I don’t know but yesterday’s sharp pull-back in EUR/JPY did again demonstrate that the market is always a two-way beast.