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Flash: Weak Yen story ran into headwinds last week - DBS Group

FXstreet.com (Barcelona) - DBS Group analysts note that the weak yen story ran into some headwinds last week.

They note that when USD/JPY first broke above 100 on May 9, it was followed immediately by volatility in the Japanese government bond (JGB) market. They add that between May 9 and May 23, the 10-year JGB yield rose from 0.60% to a year’s high of 1.00% and was also on May 23 that the Nikkei 225 index dived 7.3% or 1143 points. Further, they see that USD/JPY closed lower at 101.27 last week from its high of 103.73 on May 22. Comments by PM Shinzo Abe and Bank of Japan (BOJ) Governor Haruhiko Kuroda highlighted an urgency to stabilize the JGB market in the nearterm. They see that Japan wants to ensure that higher rates represented the success of its policies to reinvigorate its stagnant economy, and not a lack of confidence over the management of its fiscal finances.Japan will present its fiscal reforms at the G20 Summit in September. They finish by writing, “Meanwhile, the government also wants to encourage Japanese companies to boost capital spending. According to a recent Reuters Corporate Survey, more than three quarters of Japan Inc have a desire for USD/JPY to stabilize around the 95-100 range.”

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