The entrenched bureaucracy at the Ministry of Finance has been talking down the JPY with modest success i recent sessions but incoming FinMin Fujii laid waste to that strategy this morning, reverting to campaign rhetoric about how a strong JPY improves Japanese purchasing power.
Japan has been suffering from deflation off and on for the last dozen years; they need more purchasing power like they need a hole in the head…
The DPJ hopes to reform the Japanese economy from an export-led model to a consumption-led model. That is admirable, but it won’t happen overnight. The stronger JPY will cause more pain than the DPJ can stand before long.
90.10 held for a third time this morning as protection of 90.00 barriers holds the line. A break of those lows could see a run at the levels seen around the turn of the year at 87.10.
US bond yields are falling rapidly today despite the soft dollar. This is particularly unhelpful to USD/JPY. 10-year notes are down to 3.39% yield from around 3.44% late yesterday.