Safe haven demand for the JPY has abated since Wednesday, because of hopes that US politicians may find a way out of the fiscal impasse. As a result, USD/JPY recovered from 96.60 to above 98. Koichi Hamada, adviser to Prime Minister Abe, warned that the BoJ should be ready to act if the JPY strengthens again. There are concerns that the nomination of Janet Yellen to become the next Chairman of the Fed will further delay the reduction of monetary stimulus. BoJ Governor Kuroda said, however, that it is premature to discuss additional monetary measures given that inflation expectations have increased and consumer confidence has improved. Indeed economic data releases continue to reflect a moderate recovery in the economy. Household and business confidence rose in September. We believe a combination of improving risk appetite in financial markets and a further divergence in monetary policies between the US and Japan should support USD/JPY towards 105 in the coming months.