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Yen Nosedives Amid Official Doublespeak


The yen's relentless slide continued on Wednesday, with USD/JPY soaring to a two-decade high of Y126.32. The rate received a fresh boost as BoJ Gov Kuroda vowed ongoing powerful monetary policy easing, reassuring market participants that Japan's central bank does not intend to follow the hawkish path taken by the Fed. The upswing in USD/JPY was reportedly amplified by thin liquidity (per BBG market sources), which allowed the pair to clear 2015 highs on its way to best levels since 2002.

  • The rate trimmed gains later in the day as Japanese officials fired another warning shot. In further escalation of attempts to jaw-bone the yen higher, FinMin Suzuki called its recent moves "very problematic," but refused to comment on specific levels. However, his comments failed to trigger anything in the way of a meaningful pullback in USD/JPY, with the rate finishing the day in positive territory.
  • The doublespeak of Japanese officials (ultra-loose policy/worry about yen depreciation) keeps markets in the state of uncertainty, with implied USD/JPY 1-year volatility striking a two-year high on Wednesday.
  • There is ongoing debate about the possible ceiling for USD/JPY. Some analysts are pointing to the nearby round figure of Y130.00, with more bullish watchers setting their sights on Y135.00 which represents the 2002 peak. Curiously, current BoJ Gov Kuroda was the Finance Ministry's FX czar when USD/JPY surged to Y135.00 in 2002.
  • USD/JPY trades flat at Y125.62 at typing. The next bullish target is provided by May 17, 2002 high of Y128.15, ahead of the aforementioned Y130.00 figure. Bears initially look for a pullback under Apr 12 low of Y124.77.
  • The Nikkei reported that Japan considers implementing simplified quarterly earnings report process. Note that the government has been discussing dropping the requirement that listed companies compile these reports, arguing that it promotes short-term profit seeking.

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