We recommended that a long position be taken in the dollar yen pair in the latest edition of our magazine (see here, page 79 – http://issuu.com/spreadbetmagazine/docs/spreadbet-magazine-v10_generic).
Overnight thee dollar rose to a fresh 6 1/2-month high against the yen after the Japanese opposition leader, whose party leads public opinion polls ahead of a parliamentary election next month and is seen by markets as likely to win, reiterated his call for bold monetary easing. Our article speculated that instead of leaning into the wind as per historic intervention efforts, the BoJ are likely to follow the wind this time and act to add momentum to natural weakening.
With recent economic news out of the US showing a pronounced divergence in the direction of the Japanese and US economies with the Japenese business environment deteriorating and GCP again falling year on year, it is high time that the Japanese really did embark upon a properly bold course of action to weaken the yen. A currency around 100-110 is needed to add some meaningful incremental growth to the economy and maybe now is the time that the politicians and the BoJ act with such decisiveness.
The Liberal Democratic Party leader Shinzo Abe said he wanted unlimited easing to achieve a price target although he stopped short of naming this figure, I doubt it was 1 or 2 yen higher. The experience of the Swiss National Bank in maintaining a currency target illustrates to the Japanese that it is possible.