Re: GBPUSD

Research Spotlight "Japan Inc. & The Yen" UBS FX Strategy Last week, Chairman Sakurai of Japan's Association of Corporate Executives surprisingly said that Japanese authorities should not intervene in FX markets. Is this a sign that Japan Inc. is finally willing to embrace a strong yen, breaking its dependency on unofficial government support of the exchange rate? We think this is only part of the story. Here's another part: a recent METI survey and our own FX flow data show that Japanese corporates haven't had much FX to repatriate since 2008. Please see the Talking Points note entitled "Japan Inc. and the Yen" on www.ubs.com/fx for details.

JPY Targets: USDJPY 1m 85.00, 3m 95.00 The FOMC decision renewed downward pressure on USDJPY after the BoJ voted unanimously to keep the policy rate unchanged at 0.1% and did not announce further easing measures. Finance Minister Noda was on the wires for a third successive day, noting that "Currency moves after the Fed's decision appear a little one-sided. Excessive foreign exchange moves are bad for the economy, so I will keep closely monitoring the market". Yesterday marked a significant escalation of rhetoric when Noda suggested that the government and the BoJ should cooperate on the strengthening yen, a clear hint that the government would prefer to use BoJ easing as a tool to limit yen strength, rather than resort to actual FX intervention. Vice Banking Minister Otsuka echoed these sentiments during the Asia session, saying that that government and the BoJ must cooperate to prevent a rapid rise in the yen adding to deflationary pressures, and went on to say that solo FX intervention by Japan would have little effect on currency markets. Otsuka said that the BoJ will need to act if FX moves have a big impact on the economy. Although he does not have authority over FX matters, his views offer a useful insight into government opinion. Trade Minister Naoshima said it is hard to decide on FX intervention at this stage. In addition he said he outlined that the economy must be closely watched before considering additional stimulus steps.