Update - the Graveyard - USD/JPY

Posted by Graham Parlane on 7 November 2012

All

This trade is progressing slowly but surely. To recap, the bones of this trade are;

# The 30 year run of trade surpluses has now turned to deficits as the Japanese turned off their nuclear power stations after the Tsunami inspired Fukushima disaster. As a result the Japanese now import the vast majority of their energy requirements.

# Japan’s demographics are poor with the population forecast to decline to 90 mio by 2055 from the 127 mio peak in 2004. Those citizens that are left will be much older too.

# The Bank of Japan has set forth on a new round of monetary policy easing. Top Japanese research house Nomura have been widely quoted recently regarding the new policy saying that the “JPY is likely to weaken due to the BoJ becoming more proactive as a result of likely changes in government leadership as well as changes at the Japanese central bank in coming months.

# …and the budding theme that we here at Edge Capital are watching with great interest is the vast supplies of cheap energy (shale gas) that the U.S is currently harnessing. We think this could be a major kicker for the U.S in coming years. Cheap currency and super low interest rates have been prevailing for 5 years now, add super lean business organisations and top it off with cheap energy. That should be one tasty cake when baked.

USDJPY – click here to view chart

P.S. Got to love NZD/JPY on this basis too !

Cheers G.

Tags: BOJ, Broker, Currencies, Energy, Foreign Exchange, FX, FX trading, Japan, JPY, Nuclear Power, NZD, NZDJPY, Shale Gas, Trader, US, USD, USDJPY