[Pimpllus]

Investors continued to add net long JPY positions against the USD. Japanese investors also increased net long JPY positions, according to TFX data as of 5 June, to the largest level in over a year. In terms of flows, international transactions data from the MoF published on 8 June show that both life insurance companies and investment trust management companies increased net foreign bond purchases significantly in May, taking them to levels last seen in the summer of 2008. The flow data imply that the risk appetite of Japanese investors is rising on the back of positive macroeconomic data, as well as higher US Treasury yields. While these flows should be positive for USD/JPY, the actual impact is likely to be mitigated by the possibility that some of the positions are currency hedged. Traders continue to expect USD/JPY to be rangebound in the short-term and the one-month forecast is at 98.