Blowback from scandal deepened today as Japanese Prime Minister Shinzo Abe took responsibility for the loss of trust in his governments. However he continues to deny that he or his wife had intervened in the sale of land to a connected school operator. Only last week the finance ministry announce that documents over the discounted sales to Moritomo Gakuen has been tampered with. With suspicions swirl over a cover up sparking a political crisis, oppositions and not with public is calling for the Premier and finance minister Aso to resign. Two opinion polls published over the weekend indicated that Abe's support collapsing to its lowest since he took office in 2012, highlighting the majority of Japanese believed he was accountability for the scandal. At this point markets must contemplate the end of “Abenomics” with multiple resignations. USDJPY fell to 105.60 low in reaction. When BoJ introduced the 1st Arrow JPY depreciated and the Nikkei index had rallied significantly. Despite fundamentals not warranting a strong JPY without Abenomics, especially considering economic fundamentals and US yield spreads, pulling support for Abenomics will likely drive JPY higher. We remain negative on USDJPY watching 104.30 support.
By Peter Rosenstreich