Bloomerg article from the weekend, required reading:

Yen Bears See Vindication in New BOJ Under Abe Watch: Currencies

  • Polls signal the main opposition Liberal Democratic Party will win elections on Dec. 16, led by Shinzo Abe who last week called for the BOJ to pursue unlimited bond purchases and zero-to-negative interest rates.
  • BOJ Governor Masaaki Shirakawa is due to step down in April after a five-year term. “This is a major shift and the key event is the replacement of Shirakawa,” … Nomura Holdings Inc. “It really is a change that would move the BOJ away from being the least expansive in terms of balance sheet use to potentially being ahead of the other central banks.”
  • Three-month options show a record premium for dollar calls, which grant the right to buy the U.S. currency against the yen, over puts, which confer the right to sell.
  • “The market is making a bet that this call for an election is a paradigm shift,”