From Black Swan Capital Newsletter:

“Fed up with the lowest bond yields in the industrialised world, Japanese investors have been piling up their holdings of foreign debt, attracting by rising interest rates in the United States, and even higher yields in Australia and New Zealand.

“Japanese investment trusts, which usually do not hedge their currency exposure, lifted their holdings of U.S. debt to 6.11 trillion yen ($51.88 billion) in January, up 39 percent from a year earlier, reported Reuters.” 

Domestic Japanese searching for yield helps explain why the yen has been relatively weak despite all that “good” economic news. But, sooner or later, given the weight money being thrown at Japan, coupled with the growing expectation that Japanese interest rates “must” rise (timing on that may not matter as much as expectation), we do expect the yen to respond.  

The question:  And at what level of move down in USDJPY triggers the Japanese to close their unhedged positions in favor of yen?  Answer: We don’t have the foggiest idea.  

So, we turn to our bone throwing for some answers (see chart next page). 120 USDJPY before we see a turn?