FXstreet.com (Barcelona) - Its seems that the party hosted by
yen-bears has been interrupted momentarily after yesterday's
comments by Japan Economic Minister Akari Amari, assessing that
Shinzo Abe's aggressive campaign to weaken the yen might well have
some limits, weighting on the USD/JPY. Other Japanese officials
have since warned that an oversold JPY risks damaging certain
sectors of the Japanese economy.
… The hand that rocks the yen?
Undoubtedly, politics became the mayor driver behind the Japanese
yen weakness since mid November, when investors needed ¥79.20 to
buy $100 in contrast with ¥87.90/88.00 today.
Nonetheless, one the main barriers Japanese policy-makers face is
represented by the high ineffectiveness of former measures with the
same objective, that is, quelling the deflation that has been
punishing the country for the last two decades. The other relevant
obstacle is the lack of credibility by the FX community. Regardless
of how big a package of stimulus could be, or how many trillions of
yens would be pumped into the economy, everything could be in vain
if investors do not realize that this time the Government and the
BoJ are together, joining forces in order to wake up some inflation
expectations, and lure the citizens to reactivate the frozen demand
Apart from the late backdrop of increasing risk aversion, market
participants would be well placed to fully anticipate a change in
the inflation target to 2.0%, doubling the current 1.0%, in the
next BoJ monetary policy meeting on January 21st -22nd. This,
combined with the next fiscal challenges facing the US economy and
a repatriation of JPY due to the end of the fiscal year in Japan
would be no small issue for yen bears over the upcoming weeks,
supposing they want to keep the weakness going to key resistance
levels located at 90.00, 95.00 and 100.00 against the greenback.
In addition, Currency Analyst at BTMU, Lee Hardman, comments that
"… the price action is more a reflection of crowded short yen
positioning which had made a yen correction higher after largely
interrupted heavy selling since July 2012 long overdue. It is also
a reflection that yen overvaluation is closer to being almost fully
unwound according to our long-term models with further downside
potential likely to require a fresh catalyst… ".