Profit taking in large yen short positions continued to push the yen higher last week. The market was disappointed that the BoJ did not address recent volatility in the domestic bond market and strength in the yen. Data from the Ministry of Finance show that Japanese investors continued to sell overseas assets, fueling market concerns that the yen carry trades will not resume. This further supported the yen. On the bright side, the BoJ minutes stated that members continue to expect an improvement in exports and investment with inflation to trend higher in the coming months. We believe that the BoJ is likely to address recent bond volatility that has increased the interest rate risk for financial institutions, which may lead to sales of JGBs. It has become more expensive to hedge against further JPY strength, though we expect any strength in the yen towards 93 against the USD to trigger actions from the MoF/BoJ. We remain comfortable with our year end USD/JPY target of 110 as rising yields in the US will support the USD.