Fxpro Info

We could be watching Japan build a trap for yen bulls. With concern over the global recovery still rising and with global appetite for risk still falling, the yen is likely to remain in demand as a safe haven. This isn't good news for Japanese exporters, who have watched a decline in the dollar down to nearly Y85 erode their profits in the last few months. Pressure on the Japanese authorities to do something about the yen's strength is only likely to grow later this week as new data from Japan, including unemployment, consumer prices and household spending, will reinforce forecasts for continued slow growth and more deflation. Also on Tuesday, the Nikkei Index fell under 9000 for the first time since May 2009 because of exasperation over the lack of policy response. So far, though, there has been little concrete sign of action by either the government or the Bank of Japan and yen bulls have been getting bolder. Direct market intervention by the Bank of Japan has been largely ruled out, given the accusations Tokyo would face from the U.S. of currency manipulation. This is certainly something the Japanese authorities would want to avoid ahead of the next meeting of finance ministers from the Group of Seven nations early next month.