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Strategies & Market Trends : Currencies and the Global Capital Markets
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To: Henry Volquardsen who wrote (1299)2/22/1999 3:39:00 PM
From: Paul Berliner  Read Replies (2) of 3536
 
Mr. Yen says Japan tolerates weak Yen: (Why the change of heart?)
biz.yahoo.com
Why has Sakakibara changed his tune from last summer, where he bitched once a day for every 1 Yen move in Dollar/Yen over 130?
It seems the answer is becoming quite clear to me.... and while this is only a shot in the dark, it seems to make a fair amount of sense.

The rise in US Long Bond yields over the past 2 months has been fairly surprising to most. Noteably, as Japan works to recap the banks, it would be prudent at this time to cash in some of their US bond holdings, which as we all know is a lion's share. This could be a big catalyst behind our weak treasury prices. As further evidence, bonds have not followed the Dollar's rally the last few weeks, which is somewhat against trend. Thus, it can be argued that someone is still doing a lot of selling in the bond market, which is countering the current short-term fundamental bullishness for bonds, which is a stronger Dollar. It could thus be concluded that the new 'Weak Yen' policy of Sakakibara's is meant primarily to enhance gains on BoJ sales of US Treasuries. The 10+ Yen move over the last month will net them in the area of an 8% - 12% greater windfall on the sales.
The one hole in this theory is that the Yen should be strengthening if they are cashing in some US chips - unless they are quietly selling Yen on the open market to offset this effect. If the Long Bond goes to 6% soon, I think we can all point a finger at Japan with a high degree of confidence that they are responsible for the caper.
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