The Japanese yen made steady gains against the dollar and the euro, enjoying the safe haven status. This is changing and could continue to change. The return of Japan to the dreaded deflation justifies an intervention, at least a stealth one. However, Japanese authorities showed their weakness in the past, and it’s hard to blame them: fighting the safe haven flow is very hard. There are various factors moving the yen. The picture is mixed: Deflation: The fall in prices is sometimes called the “Japanese disease”. When an economy stagnates too long, it is “turning Japanese”. A constant fall in prices paralyzes the economy. Japan fought very hard to move prices to the upside, but now they are falling again. In order to reach the +1% inflation target, the BOJ might act. Raising the QE program up to 70 trillion yen is discussed in public. Bypassing the dollar: Japan and China began trading directly with their own currencies, bypassing the dollar that was used for their bilateral transactions so far. Apart from the implications for China, this move could strengthen the yen. Fighting EUR/JPY: Recent comments show that Japan is not only worried about the strength of the yen against the dollar, but also against the euro. The euro-zone is a significant trade partner. US Indicators: It’s important to note that apart from safe haven flows, USD/JPY reacts in the most “normal” manner to US indicators – rising on good ones and falling on the disappointing ones. The absence of QE3 in the US plays against the yen. Internal issues: Apart from deflation, Japan’s economy isn’t doing too well. A hotly debated sales tax is weighing on the country, as well as energy issues following the catastrophic earthquake, tsunami and nuclear tragedy. In addition, it has a debt mountain that is double its GDP. Nevertheless, these issues don’t impact its safe haven status or its currency. This article is part of the Forex Monthly Outlook. You can download it by joining the newsletter in the form below, which appears on any article on Forex Crunch. Yohay Elam Yohay Elam Yohay Elam: Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I've accumulated. After taking a short course about forex. Like many forex traders, I've earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I've worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts. Yohay's Google Profile View All Post By Yohay Elam Opinions share Read Next EUR/USD Aug. 20 – Limited Gains Following More Details Yohay Elam 10 years The Japanese yen made steady gains against the dollar and the euro, enjoying the safe haven status. This is changing and could continue to change. The return of Japan to the dreaded deflation justifies an intervention, at least a stealth one. However, Japanese authorities showed their weakness in the past, and it's hard to blame them: fighting the safe haven flow is very hard. There are various factors moving the yen. The picture is mixed: Deflation: The fall in prices is sometimes called the "Japanese disease". When an economy stagnates too long, it is "turning Japanese". A constant fall in… Regulated Forex Brokers All Brokers Sponsored Brokers Broker Benefits Min Deposit Score Visit Broker 1 $100T&Cs Apply 0% Commission and No stamp DutyRegulated by US,UK & International StockCopy Successfull Traders 9.8 Visit Site FreeBets Reviews$100Your capital is at risk.2 T&Cs Apply 9.8 Visit Site FreeBets Reviews$100Your capital is at risk.3 Recommended Broker $100T&Cs Apply No deposit or withdrawal feesTrade major forex pairs such as EUR/USD with leverage up to 30:1 and tight spreads of 0.9 pips Low $100 minimum deposit to open a trading account 9 Visit Site FreeBets ReviewsYour capital is at risk.4 T&Cs Apply Visit Site FreeBets ReviewsYour capital is at risk.5 Recommended Broker $0T&Cs Apply Trade gold, silver, and platinum directly against major currenciesUp to 1:500 leverage for forex trading24/5 customer service by phone and email 9 Visit Site FreeBets ReviewsYour capital is at risk.