Yen rises as Carry Trade Momentum Eases

Yen rose as increased implied volatility curbed the momentum of carry trades. On the other hand, shares and yields fell mainly on speculation that investors will transfer funds to more safe and high yielding securities.



[B]Japan premier vows to tackle pensions mess:
[/B]Japan?s prime minister pledged yesterday to deal with chaos in the pensions system ahead of next month?s upper house election. According to a local newspaper, the government was set to probe charges of embezzlement by officials.
Source: Gulf Times

[B]Aging Japan struggles to fill universities:[/B]
The number of 18-year-olds peaked at 2.05 million in 1992, when the baby boomers’ children were entering universities, but should drop to 1.21 million in 2009. Japan has one of the oldest and most established systems of higher education in Asia, but today its universities are scrambling to find new ways to attract students. Years of falling birthrates have rapidly shrunk the population of young Japanese, leaving more universities unable to find enough students to fill their classrooms and campuses. The rapid graying of Japan’s population has already been felt in other parts of society, including the lower rungs of the nation’s education system where hundreds of half-empty elementary and high schools have closed or been merged over the last two decades. But it has only recently begun to affect higher education.
Source: Taipei Times

[B]Nissan to Buy Parts From China, India to Cut Costs:[/B]
Nissan Motor Co., will now buy more components from China and India after profit fell for the first time since the company’s record loss in 2000. Buying parts made in countries where wages are 5 percent of those of Japan would help Nissan’s profit margins. According to McKinsey & Co., e[B]xports of Indian- made parts may rise almost six-fold to $40 billion by 2015 from about $6.7 billion in 2003 because of demand from automakers including General Motors Corp.
Source: Bloomberg

[/B][B][B]Currency Market:[/B]
[/B]The yen gained some upside momentum after breaching the 124 mark yesterday. The yen also rebounded against the Euro after Chinese stocks slid losing the most in two weeks, prompting investors to reduce emerging-market purchases funded by money borrowed in Japan. Implied volatility by one-month dollar-yen options rose to 6.2 percent which may discourage carry trades as it suggests greater exchange-rate fluctuation risk. As of 3:00am New York time, the pair was trading at 123.82.

[B]Stock Market:[/B]
Japanese stocks dipped again today led by property developers, such as Mitsubishi Estate Co. mainly because investors shifted interest in stocks that may be hurt by rising interest rate. Some exporters; however, were able to prevent red ink as investors thought that the benefit of weaker yen shall be greater than the rising cost of borrowing. The Nikkei 225 average fell 101 points closing at 18087.48.

[B]Bond Market:
[/B]Japan?s bonds rose on speculation that investors might shift from the equities market to seek high yields in much safer securities. Such attitude spread as hedge funds experienced massive losses. The 10 year bonds climbed for a second day as Nikkei fell on concerns that financial companies will experience losses on US mortgage bonds. The yield dropped 0.5 basis points for the day resting at 1.89%.