July 12, 2018, 20:21: The start of the second stage of the yen depreciation [From Mr. Rikio Shima's newsletter]
The USD/JPY broke above the trend line it pulled from this week around 125 yen. In the midst of the US-China trade war, I expected risk-off yen appreciation, but the dollar has been bought, as legendary trader Rikio Shima (Rikio Shima) views the situation as follows.
I feel this marks the start of a large yen depreciation trend. The market has changed. I would not say that risk-off yen appreciation has completely ended. Also, when asked whether the yen is undervalued or overvalued, the yen is quite undervalued. The market from here on will see this quite "undervalued" yen become even cheaper.
In the near term, around 114–115 yen might be the key level. Last year, the market hit that level multiple times, so there is caution. There are observations that the U.S. will not tolerate yen depreciation.
Until now, no matter how much the Bank of Japan eased monetary policy, the yen did not weaken easily. It has been said that this was due to a strong “home bias” among Japanese institutional and individual investors. Japan has nearly 1900 trillion yen in household financial assets. Companies also hold over 250 trillion yen in cash and deposits (there have been frequent opinions that this portion should be taxed). If this financial balance shifts by as little as 5%, it would trigger a very large movement. The market would change. Right now, the change in this area, especially in corporate behavior, is the cause of the yen’s depreciation.
From “Shima Rikio’s Practical Real Trades” (Rikio Shima).
Will this be the dawn of a yen depreciation environment and a dollar appreciation era? I want to ride a big trend! (Editorial Department)
USD/JPY, weekly chart.
