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Forex pairs in this Article » USD/JPY (New York) - Recent data releases show that large Japanese banks were heavy sellers in April – in May however, selling pressure from this direction dropped sharply, notes Gareth Berry, a Research Analyst at UBS.

The BoJ aims to increase its JGB holdings by Y50 trn annually at a time when net JGB issuance from the MoF is only running at just over Y44 trillion per year. Put simply, the ‘free float’ of JGBs is now in decline, and the arithmetic is finally making its presence felt So Governor Kuroda has mostly regained control of the yield curve it seems, disappointing some yen bears.

“We see things differently however – our bearish yen call has never relied on a JGB market blow-up taking place. Rather, subdued JGB yields at a time when yields are rising elsewhere is a recipe for yen weakness, and thanks to last week’s FOMC decision, events seem to be unfolding along these lines. Overall, we stick to our end-2013 USD/JPY forecast of 110.” Berry adds.
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