Japan JPY: Turn tactically long yen on Abe ratings slip till Yellen (Wed)

This headline on Bloomberg caught my eye: "Abe's Approval Rating Slips Below Disapproval: NHK Survey" (2 Oct-17, 730pm SG time). Full article below.

Lost momentum for Abe - and catch-up by Koike - is the key (#1) risk to my longstanding strategic short JPY bias (see last week's post on Japan elections preview):

...I would focus on the following key risks to a weak-JPY view: 1/ LDP lead is chipped away by Ms. Koike or a potential unified opposition (watch polling data), 2/ Any signs of LDP infighting, 3/ Abenomics confidence/credibility are tested on either monetary/fiscal policy fronts (e.g. resistance to another VAT hike via consumption/wage concerns, opposition intensifies on BOJ market distortions) and 4/ If external global risk aversion (via extended global equity sell-off) intensifies and spurs yen short-covering (risk is heightened by current/longstanding consensus short JPY positioning).

As such, I turn tactical long JPY. The time horizon on this trade is approx. 2 days - ie untill Yellen speaks on Wed unless we see follow-through from other pollsters (link to Google News alert link). This morning's upbeat Q3 Tankan Survey (indirectly affirmative for Abenomics) provided a good entry opportunity to enter long-yen. Whilst Ms. Koike/"Party of Hope" are unlikely to win the 22 October elections, markets are particularly jittery/sensitive towards an 'October surprise' - given results from UK GE earlier this year and the AfD's showing in German elections last weekend.

I'm RV long JPY vs short GBP ahead of the Tory Party Conference (Day 3) in Manchester - featuring speakers: UK Home Sec Rudd, Trade Sec Fox, Brexit Sec Davis, Foreign Sec Boris Johnson. I expect to close this GBP short before BOE's Haldane speaks Thu/Fri.

Entry: GBP-JPY at 150.1

Target: USD-JPY at 112, GBP-USD at 1.32 = GBP-JPY at 148

JPY vs GBP: 1mth vs 3-day history (Bloomberg, 2 Oct-17)

Reference:

Abe's Approval Rating Slips Below Disapproval: NHK Survey By Chikafumi Hodo (Bloomberg) -- Japan Prime Minister Shinzo Abe’s ruling party garnered support of 30.8%, while Tokyo Governor Yuriko Koike’s new Party of Hope gathered 5.4% support three weeks ahead of a general election, according to asurvey conducted by public broadcaster NHK.

  • LDP support falls by 6.9 percentage points from the previous survey

  • 40.4% of respondents said they were still undecided about their preference of political parties

  • Approval rate for the Abe administration falls 7 percentage points to 37% from the previous poll conducted last month, while disapproval rate rises by 8 points to 44%

  • NHK survey shows 53% of respondents saying they will definitely vote

  • NOTE: Survey of 3,149 respondents aged above 18 years old conducted during three days from Sept. 29

#japan #jpy #gbp #brexit