TD suggest that "now that the Bank of Japan.....>

YEN: TD suggest that "now that the Bank of Japan has demonstrated a willingness

to allow for more yield curve control (YCC) flexibility, policy should become

more fluid in the coming months. We think the BOJ could introduce additional

flexibility as soon as Q1-2019 insofar as the output continues to remain

decisively positive and they can credibly defend the 20bps upper bound. We think

the JPY's return profile should be asymmetrically skewed to appreciation over

the medium-term. Allowing for more flexibility suggests that rate differentials

will become more balanced. Though this will be slow, it does suggest that global

capital flows will shift back in favour of inflows for Japan. We continue to

target Y104 for USD/JPY at the end of 2018. The USD outlook is particularly

uncertain right now given the shifting geopolitical landscape. Instead, we think

GBP may be a better funding currency right now for JPY longs as the BoE is

sidelined and Brexit risks are returning to the market's attention. We think

simple 6M GBP/JPY put spreads offer an attractive risk/reward way to position

for the simultaneous risks of a more hawkish BoJ and Hard Brexit. A 22-/8-delta

put spread currently offers an (indicative) total potential net payout of 10:1."