The JPY has been in demand of late, mainly on the back of a sudden rise in risk aversion. We do not expect risk sentiment to deteriorate sustainably. This week’s downside in Japanese stocks has been driven by falling liquidity expectations on the back of the Fed’s less dovish monetary policy stance and by rising concerns about the domestic bond market. However, any fall in US liquidity expectations should ultimately be compensated for by increasing US growth expectations. The Fed will taper QE only should incoming growth data show further signs of improvement. Accordingly, the most recent developments should not have ... (full story)