As Zero Hedge has noted before, we think the market was overvaluing the yen on the back of numerous theories (e.g. safe haven, shallow analysis of Japanese demand numbers, various dollar related items, BoJ open actions). As we looked at the numbers, we couldn't help but think that some were being a little optimistic in light of the macro factors at play. At month end, the market reacted sharply to almost consistently bad news coming out from Japan; unemployment, production, retail and the Tankan indices all came out below expectations.
The few bright spots were instances where we were still seeing numbers that were abysmal in an absolute sense, were being benchmarked against an even lower consensus view and were typically following a dramatic drop in the previous period.
The long anticipated fiscal year-end yen repatriation was the trendy, foolishly optimistic view that was undoubtedly somewhere in the mix but was overwhelmed by the raw macro factors at work (see a pattern here??). The last minute plummet in the yen over the past couple of days probably took a lot of the wind out of the sails but going forward, there is still probably more room for the yen to drop.
At least part of the Zero Hedge weak yen outlook going forward is driven by a probabilistic expectation that the BoJ will further intervene on the open market to sink the yen. As we have covered the Japanese domestic demand story before and the export story has been well covered by most news outlets, we won't bore you with the why. Post-carry trade crash, the yen is historically strong and there is bound to be some desperation in the halls at METI headquarters in Kasumigaseki.
Separately, the Tankan numbers are interesting; after looking through, we will try to highlight any potentially important numbers.
March charts for USD/JPY, AUD/JPY, and EUR/JPY: