JPY Daily News

Yen Strengthens in Response to Nation's Worst Disaster since WWII

The yen has significantly strengthened since earthquake struck Japan followed by devastating tsunami on Friday as speculators bought the yen with expectations for insurers to begin repatriating yen to pay billions in insurance claims. Traders were also purchasing yen as a safe haven currency in response to the heightened risk aversion in the markets.

The yen was the strongest performer in the FX markets on Friday and that trend looks to continue with the opening of trading in Asia as the USD/JPY is currently trading down at 81.30 from Friday's close of 81.84.

While the knee jerk reaction of the market was to buy yen on expectations of insurers repatriating funds back to Japan, a larger looming issue may be lurking should the major credit rating agencies begin to further downgrade Japan's sovereign credit rating.

The Japanese government already shoulders a debt burden of 200% of GDP and the debt should increase as the government deals with the fallout and cleanup efforts from the country's worst crisis since WWII. Government debt levels may rise if the government is forced to raise new funds to finance the aftermath of the disaster.

This morning the USD/JPY breached the 80.90 level and last bastion of support is the October 2010 low of 80.20. A move below this price would test the all-time low for the pair at 79.75. The pair last traded at this price in 1995.

Current Time: 05/27 05:27 GMT

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#	Time	$€£¥	Event	Per.	Prev.	Fore.	Act.	Imp.
03/14
	04:30	JPY	Revised Industrial Production	m/m	2.4%	2.4%	1.3%
	05:00	JPY	Household Confidence		41.1	41.6	40.6
		JPY	Monetary Policy Statement		*	*	*
	05:48	JPY	Overnight Call Rate		<0.10%	<0.10%	<0.10%
	07:16	JPY	BoJ Press Conference		*	*	*