The yen was helped by narrowing Treasury bill spreads and a weaker US dollar, CIBC analysts say. USD / JPY is trading at 103 in the fourth quarter and 101 in the first of next year.
“The yen continues to perform even in the midst of a market rally. Indeed, much of the rise in the JPY can be attributed to the narrowing of short and long credit spreads against the UST. This is corroborated by weekly MoF data indicating that the pace of outward foreign investment flows is still much lower than it was before the crisis hit earlier this year.
“For the real economy, the hope right now is that the Chinese economy will continue to recover, helping Japanese exports and easing the pressure to do more on the fiscal front. The authorities stressed that public finances are in a difficult situation and that the sales tax is unlikely to be reduced. “
“The BoJ remains on autopilot, but is ready to act if yields increase. The JPY should continue to draw inspiration from a weaker dollar and narrowing spreads for the time being. “