JPY: Will history of Q4 weakness repeat itself? - Nomura

Yujiro Goto, Research Analyst at Nomura suggest that as USD/JPY has been trading strongly recently, market interest in JPY depreciation seasonality in Q4 is rising.

Key Quotes

“We think there are four possible explanations for this anomaly, but the reason behind recent strong performance of yen-crosses in Q4 is unclear. It is interesting that there has been another domestic JPY-negative political event (a snap election) in Q4 this year, while the US data surprise index has been recovering again. The Fed is on track to hike its policy rate again in December and risk sentiment looks robust as well. Japanese lifers’ latest investment plans into H2 FY2017 showed strong demand for foreign bonds. There are near-term risk events (Fed Chair nomination and US tax policy discussions) in Q4, and if history repeats itself, these events may benefit USD/JPY again as in previous Q4s.”