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The Japanese yen has had wind taken out of its sails temporarily but better Q2 domestic data should preclude JPY short accumulation, limiting yen depreciation, as reported by CIBC Capital Markets.  

A market increasingly comfortable in discounting broad reflationary dynamics

“Recent JPY performance has proved largely distinct from domestic Japanese data. However, there are positive fundamental signs to consider. Exports have held up well while the return of the headline Tankan to positive territory (large manufacturing sentiment), points towards increasingly supportive GDP dynamics.”  

“The long awaited BoJ policy review concluded the need for a formal +/- 25bp range around their long held 0.0% 10-year target threshold. The formalising of the threshold compares with references to “around 0%” previously. However, the operation of the target range may not be totally symmetrical, namely the bank may prove more active towards the top of the range rather than the bottom.”  

“The prospect of improving domestic data should prompt JGB yields to remain in the upper quartile of the potential trading band. Such a move should preclude additional JPY short accumulation and allow the JPY to remain roughly steady against the USD into mid-year.”