David Fuller's view Eoin and I have often mentioned Japan's need to weaken the yen, to boost exports, jumpstart the economy and lift its stock market. We have also posted reports addressing this subject. Japanese monetary officials have also indicated their preference for a weaker currency. The key rate is against the US dollar (weekly & daily), to which the Chinese yuan has been effectively pegged since July 2008.

For currency traders, there have been too many false dawns in terms of yen weakness but it may have commenced. The weekly chart for USD/JPY above shows a potential base formation following a mostly successful test of yearend 2008 and early-2009 lows near ¥87. This week's upward dynamic suggests that the sequence of lower rally highs, with the last one near ¥93.90 in January, is likely to be taken out before long. A fall back beneath ¥90 would now be required to delay further recovery prospects beyond a brief pause. Accordingly, I opened long positions in USD/JPY today, paying ¥92.74 and ¥92.50 for the September contract. My intention is to increase this on a Baby Steps basis in the event of any near-term easing in response to the last two day's strong gains.