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JPY continued weakening in the Asian trading session - BTMU

FXStreet (Łódź) - Lee Hardman, FX Analyst at the Bank of Tokyo Mitsubishi UFJ points out that following last Wednesday's spike the yen dropped further in the Asian session.

Key Quotes

"The weakening of the yen and the tentative improvement in global investor risk sentiment has resulted in the Nikkei 225 index increasing by almost 4% overnight."

"The Japanese equity market has also derived some support from a report over the weekend from the Nikkei newspaper that has speculated that the Government Pension Investment Fund will increase its allocation target for domestic equities to about 25% up from 12%. The report also speculated that the GPIF will increase its combined allocation target for foreign equities and bonds to 30% from 23% while reducing the allocation target for domestic bonds to 40% from 60%."

"The speculated GPIF allocation changes are broadly in line with consensus expectations. A pick up in capital outflows from Japan as the GPIF increases its holdings of foreign assets supports our view that the yen will likely weaken further in the year ahead."

"The Japanese equity market may also have derived some support from comments by Japanese Prime Minister Abe who according to an FT report hinted that he may delay increasing the sales tax hike which is planned for late next year. In the interview with the FT, Prime Minister Abe is quoted as stating that 'by increasing the consumption tax rate if the economy derails and if it decelerates, there will be no increase in tax revenues so it would render the whole exercise meaningless'."

"Prime Minister Abe is expected to make a final decision on whether to implement the planned sales tax by early December which will provide enough time to fully assess economic momentum in the third quarter. Economy Minister Amari has stated today that the economic recovery was probably not strong in Q3."

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