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Countdown to the Japanese financial year end and what it means for FX

Much like seasonal bird migration in nature, we see yen migration at the end of the Japanese financial year

Towards the end of March, and the Japanese fiscal year end, is historically a time that we can see some large flows in yen pairs. As Japanese firms look to close up their accounts and try to bolster the numbers, they repatriate profits back home meaning they buy yen.

The last few years haven't been as heavy for seeing these flows as previously. There's a few reasons for that. Partly it's due to the action of the BOJ in weakening the yen, and there's been an increase in Japanese firms moving operations offshore rather than exporting from Japan. The economic weakness in both Japan and the world means there's less trade, which can naturally reduce profits.

Exporters are the main movers of the currency around this time so we're likely to hear more chatter about market orders being linked to them on the offer side.

It's usually the last two weeks of March that these flows pick up, and the last day they usually do their business is three days before the year end.

As we're heading towards the Feb month end also, we could possibly start to see the London fixes start to show some of these yen moves. Options could also play their part as we could see some lumpy expiries through March.

The repatriation moves are not really something we can usually pinpoint and trade against (or with) but they will likely offer an explanation if we see some odd moves in yen pairs. As I say, the effect has lessened over the last few years so we may not get anything noticeable. Much like most things in the FX world, it's a case of forewarned is forearmed.

Coming home to roost

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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