Deutsche Bank warn yen strength may become a self-fulfilling cycle

From a Deutsche Bank (macro strategist Alan Ruskin) client note

• A risk the yen strength will become self-fulfilling
• Many of the hedging activities associated with a weak yen in the first four years of Abenomics could go into reverse
• Rising Japan FX hedge ratios on foreign investments will make current account surplus recycling difficult ... could lead to a source of ongoing yen strength
• Yen's its historical correlation with Nikkei suggests USD/JPY could fall below 105
• Official BOJ intervention is unlikely (except in the case of serious FX volatility)
• Currency intervention against G-20 rules

Outlook for BOJ policy:

• More QQE ... buying risky assets, particularly securitized products