JPY Outperforms On Risk Aversion & Official Rhetoric

JPY outperformed post the Asia close. Dipping sub 134.00, after touching earlier highs above 135.00. We currently sit just below 134.40. JPY is the best performer within the G10 FX space since the start of the week.

• Whilst USD/JPY looks too low relative to the continued sell-off in US fixed income, it received support from the risk off tone in equity markets and increased rhetoric around currency weakness.
• To recap, Kuroda's comments around recent depreciation being undesirable and negative for the economy, helped drag USD/JPY back below 135.00 yesterday. This followed written comments from Japanese officials last Friday stating concern around the pace of depreciation and that they will take action if necessary.
• All of this may do little to change the yen trend, with the Fed-BoJ policy divergence likely to be on full display this week. Friday's BoJ meeting is not expected to deliver any meaningful changes, but FX could be a stronger focus point.
• Also, in focus today will be Japan yields. The BoJ will buy an additional 500bn yen of JGBs today, as it looks to defend the upper end of its 10yr yield target of 0.25%, which was breached yesterday.
• Data on tap today is capacity utilization and industrial production.