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USD/JPY hits 117.00 on recessionary Japan, buy-rumour sell-fact?

FXStreet (Bali) - USD/JPY is flying higher following a horrific QE GDP (preliminary) miss in Japan, as the country enters into recession again, with the rate reaching 117.00.

The disappointing Japanese data has some immediate implications for market participants, as it will lead PM Abe to announce a delay in a planned 2015 consumption tax (likely 18 months) in order to provide the economy some relief given the negative impact the the 1st sales tax increase has had in the economy; secondly, Abe is set to announce a general election before year-end so that he can realign political and public support. These two key decisions are likely to shift the focus into a more aggressive stance on the reflation game.

At the moment, USD/JPY has retraced significantly towards 116.35, in a sharp 65/70 pips move in what appears to be first inidications of a 'buy the rumour, sell the fact' play. As we noted ahead of the Japanese GDP release, "with the tax delay partly/fully discounted in the near term, there might even be some appetite to play a buy rumour/sell fact on Yen crosses."

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