I believe strength of USDJPY is just temporary.

2018.8.11
USDJPY
Closed at 110.77 (-0.14%) Target to 115.00 (+3.82%)
Indices
NIKKEI225 22,298.08 (-1.33%)
10y JGB 0.101% (-0.014%)
30y JGB 0.844% (-0.008%)
US 10y T-Note 2.8732% (-0.0526%)
Dollar Index 96.357 (+0.89%)

1. Rising domestic interest rate is stopping additional weakness of the currency. At July 19, USDJPY touched 113 temporarily. But from next day, the exchange rate had plunged, and reached to 110 again. Rising domestic interest rate has been the most important factor for the strength of the currency. With change of stance of BoJ towards band of the rate, yield of 10y JGB is touching level of 0.10% from level of lower than 0.05% before. I believe there have been no other catalysts. JPY isn’t safe asset anymore, considering just +0.14% in its value about -0.71% S&P500 and -1.33% NIKKEI225 at August 11.

2. Unless there are additional measures from BoJ, volatility, which is reviving with the change of stance, will be dead again. Drying volatility in Japanese FI market will keep being continued. The central bank’s measure is the minimal measure to prevent adverse effect of the policy. yield of 0.10% isn’t enough for the market participants who can get yield of almost 3% from US T-Notes. As we all know, domestic FI investors went out other markets which provide the higher yields. Why they convert their USD to JPY in the weakest moment for JPY, and come back to 0.10% by abandoning yield of 3%. I guess they need at least 0.5% to come back to the domestic market, and it’s too radical to carry out for BoJ that pronounced extension of the easing to raise inflation. The 10y JGB would be moving in the band of 0.10 – 0.15, but volatility will be dry soon like before. At 2012, about JPY300tn was traded during a month, but after implementation of QE, the volume has shrunk to JPY180tn during a month.

3. Strong USD will be continued. Dollar index pierced band of 93-95 eventually. I believe it’s just start of the strength. Looks like USD stole the status as safe asset from JPY with trade-war. At Aug 11, global stock indices were going down by about 1%, dollar index was up 0.89%. Weak Gold is another signal for strong USD. The most traded future for the metal in CME, one of traditional instruments for hedging against plunge of stock market, was off 0.06%. The strong dollar is the brightest movement among movements of other currencies, considering yield of US 10y T-Note was being bullish. I believe the trend will be continued considering one-man show of US in global economic growth and stock market.

4. I remain my target for USDJPY to 115. I think USDJPY will reach to 115 in near future. Even though Japanese real economy got strong immunity about trade war, the market participants do not care about it.

Mr. Banker, http://markety.tistory.com

USDJPY (Aug 11, 2018).pdf