Japanese Finance Minister Amari probably did not predict the chaos he was about to set off in the FX market while speaking to the reporters in Japanese around 3 AM GMT. His comments, originally translated as "the Yen has depreciated to levels consistent with the fundamentals" sent Japan's monetary unit soaring last night, as traders priced in the reality that Japan's government would not take additional steps to weaken the Yen. Mr. Amari also acknowledged that a weaker Yen may cause pain for consumers. Nearly ten hours later, reports came out that Amari's comments had been mistranslated. Apparently the minister had said the the "Yen is continuing to depreciate to levels consistent with the fundamentals." The latter translation is if anything an endorsement of further Yen depreciation, not an attempt to ease the Yen's slide.
Indeed, looking back, the whole episode looks rather dubious. Why would the government express concern for consumers while simultaneously advocating a two percent inflation target? Hadn't the PM Abe already made the case that short term pain associated with slightly higher inflation would be more than compensated by the uptick in economic activity that would come with finally beating down deflation?
The huge swings in the Yen caused by the issuance of this headline, and its later retraction, certainly shows how crowded the short Yen trade has become. The Yen has actually managed to hold some of its gains from the erroneous translation. As we saw with the post Draghi 'whatever it takes' comments, when trades get crowded, it does not take a lot for fatigue to set in.
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