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Yen Benefits From Risk Aversion

JPY

Wednesday's flight to safety was a boon for the yen, with USD/JPY approaching one-week lows. Hawkish Fed musings & familiar China jitters spooked participants, casting shadow on global growth prospects.

  • USD/JPY 1-month 25 delta risk reversal lost ground on Wednesday, snapping a three-day spell of recovery.
  • Spot USD/JPY trades at Y128.26, up 3 pips on the day. The next downside target is provided by May 12 low of Y127.52, followed by Apr 27 low of Y126.95. Bullish focus remains on May 9 high of Y131.35.
  • Jiji reported that the ruling Liberal Democratic Party's tax commission proposed a plan to raise the corporate tax rate, while expanding tax relief measures for capital investment. The plan will be consulted with the government ahead of a tax reform expected in 2023.
  • Elsewhere, the NHK suggested that Japan could waive quarantine requirement for nations with low COVID-19 rates. Japan is already launching a pilot programme, whereby small supervised groups of vaccinated tourists from selected countries will be allowed to enter.
  • Japan's trade balance and core machine orders are due later today, with CPI figures coming up tomorrow.
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