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The market is ignoring this fact, but Japan's trade deficit in November was a record JPY 685bn according to statistics published yesterday on Ministry of Finance website. If the trend continues, Japan will find itself in the twin-deficit predicament of the US. Just as a reminder Japan's fiscal position is among the worst in the developed world, with Debt/GDP of close to 200% (which is worse than troubled Italy). Most of the government debt is held domestically, so it is unlikely to be under pressure, but the currency should definitely start weakening. In fact the last time the Bank of Japan intervened to sell the yen when the FX rate broke 76.00 on Oct 31, contrary to popular expectations, the market did not reverse most of the move and has only briefly broken 77.00 since. I would be a buyer of Usd / Jpy around 78.00 with an initial target of 92.50
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