The steady grind higher in USD/JPY over the last month reflects several major macro shifts. The most important of these is the radical shift in Japanese trade patterns with huge post-tsunami imports of oil wiping out the traditional trade surplus and pushing the country into a deficit. Rising US yields have been a major contributor as well.
A less heralded factor- and one that is difficult to prove- is the likelihood that the Ministry of Finance probably got word to major Japanese exporters and institutional investors to refrain from selling USD/JPY aggressively for fiscal year-end books squaring. Coupled with perhaps some “stealth” intervention, we’ve rallied a stunning 8 yen. In a month.
It is hard to ignore the calendar, however. The fiscal year closes two weeks from tomorrow. It would not be a surpise to hear louder talk of exporter sales in the next few days. The MOF and the market have delivered a much more favorable exchange rate for Japan Inc to close its books, just as it did last year. (see chart).
