Goldman Sachs note that "the Ministry of........>

YEN: Goldman Sachs note that "the Ministry of Finance reported unusually large

sales of foreign assets by Japanese investors in the week ending July 10. The

figures imply the largest one-week sale of foreign equities since at least 2005

(when the current reporting structure began), by a large margin. The Yen did not

appear to reflect a large repatriation of overseas assets during the reporting

week, but we are closely monitoring the potential for FX repatriation flows to

follow. In terms of the broader flow picture, portfolio outflows from Japan

persisted in Q2, but slowed relative to earlier in the year. Therefore, we still

see a good case for including USD/JPY shorts in portfolios for diversification

purposes, particularly alongside pro-cyclical longs. We see three main reasons

to use the Yen as a portfolio hedge at current levels: (i) it remains the only

undervalued safe haven currency, (ii) lower US yields implies a lower cost to

hold longs, and (iii) it can meet the growing need for an alternative hedging

asset as sovereign bonds become less effective."