Faith in BoJ Divergent
The past 24 hours have not been pleasant for yen pairs. Although high-beta assets and asset classes have held well, structural drivers such as higher US rates, growth deficiencies in EM and positioning over-extension have finally forced through a major unwind in JPY shorts. Any continuation would seriously undermine BoJ ‘achievements’ since QQE. Looking at the flow picture, the latest MoF figures suggest faith in the ability of the BoJ to help different asset classes ‘hold the line’ is divergent. Foreign investors up until May were unperturbed by the slide in the Nikkei, but Japanese investors have serious misgivings about investing abroad.
Read the full report: UBS