Confusing JPY

Japan's 4Q 2017 real GDP rose 0.1% Q/Q and annual 0.5% Q/Q, below expectation for annualized 1.0% increase. However, the Japanese economy has now experienced two years of growth. In a marginal shift Private consumption rose 0.5% Q/Q suggesting household are becoming more confident in economic outlook. JPY continues to appreciate bit overall behavior is confusing. Historical relationship between USDJPY and yields has totally decoupled. During recent period of volatility FX traders favored haven currencies like the JPY and CHF, as well as the EUR.

Yet vol hast decreased significantly, as US interest expectations shown by 10-year breakeven has fallen. Japanese government leaders confirmed their confidence in BoJ Governor Kuroda, bolstering expectations that he will be reappointed for an uncommon second term. Kuroda dovish pedigree indicated at talk of early exit is unwarranted. Clearly, from today data growth has returned but hardly strong enough to demand investor’s attention (especial considering jpy inverse relationship between strength and exprt growth). USDJPY 107.30 “line-in-the-sand” failed to put up much of a fight.

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