Today was an important day in Japanese fundamentals.
Bank of Japan (BOJ) head Mr. Shirakawa gave his final press conference. Today marked the early end of his tenure along with his two other deputies. His five-year term was supposed to end on April 8, but he decided to make way for Shinzo Abe’s guy, Haruhiko Kuroda. Mr. Shirakawa told parliament that risk appetite has helped contribute to the yen’s weakness.
CHANGING OF THE GUARD
Mr. Kuroda and his two deputies, Kikuo Iwata and Hiroshi Nakaso will take office on Wednesday. The ball is now in Shinzo Abe’s court.
Can his BOJ dream team push forward his agenda unlimited easing to fight deflation?
If history is a sign for anything, the answer should be an easy no.
This time it is different, but trading the weaker yen could get ugly. Risk aversion from Europe could help contribute to a risk off environment that could help the yen move higher. The new BOJ leadership will need to pass their unlimited easing plans through parliament and that should face severe headwinds.
Currently the markets are not heavily positioned long dollar/yen (USD/JPY) as they were the other trading week. With the economic outlook remaining strong for the U.S. economic situation, traders could look for some limited downside until it becomes time for the BOJ to act.