Here Comes The Yen Correction!

Here’s comes the yen correction, yes, really!

Once again, JPY is correcting from its sharp rise as results of market jitteriness over the comments by none other than the Japanese Economic Minister Amari himself on the excessive Yen weakness…

And as you know, earlier on today Amari backtracked his comments and the market was all too happy to short the Yen again, doing the exact same thing I predicted in my Japanese Yen Strength - A Blessing In Disguise article. I hope you took advantage of this opportunity and went LONG on Yen crosses (…and followed my Forex Trading Strategy #6).

As a matter of fact, I believe after this lesson, Japanese officials are going to be more careful with what they say, and all indications are still pointing to further JPY weakness…  But don’t take my words for it, here’s what Japanese politicians are saying:

• Japan Economic Minister Amari (culprit #1 for the recent yen strength) stated that his comments on JPY earlier this week were misinterpreted and he never said 100 level in USD/JPY was a turning point. He planned to attend BOJ meeting next week (Jan 21-22nd) and hoped the BOJ would understand PM Abe’s strong hope to adapt 2% inflation target
• Japan LDP Secretary General Ishiba (culprit #2 for the recent yen strength) commented that the JPY currency was in the process of correcting from excessive strength. Monetary policy must be aggressive to help the economy to recover
• Japan Chief Cabinet Secy Suga: The end of deflation and excessive JPY currency strength was proceeding smoothly
• Japan Vice Finance Minister Yamaguchi commented that government would keep fiscal discipline in FY13 budget. He added that he would attend BOJ meeting next week and expected an agreement between BOJ and government
• Japan PM Abe reiterated his view that he would like someone with strong will to overcome deflation for new BOJ government and this would lead to a more fundamental change in monetary policy.

I conclude that the current Japanese administration still supports further depreciating the Yen and will do whatever it takes to drive inflation back above 2%, even if it means changing the administration at BOJ.  This is not only a powerful message, but the smoking gun that we need to hold on to our long-term positions.  I believe we will see JPY resume its weakness and I wouldn’t be surprised to see USDJPY breaching the 100 level.

So if you are shorting the JPY, might as well hold on.

Peace,

FUNDAMENTALS

Abenomics And Fitch?

G7 Statement Gives Japan A Free Hall Pass?

Bank Of Japan (BOJ) Joins the QE Infinity Club!

Here Comes The Yen Correction!

Japanese Yen Strength May Be A Blessing In Disguise?