TOKYO: Japanese day traders, colloquially and collectively known as "Mrs Watanabe", are buying the yen as it nears eight-year lows, suspecting that policymakers would be reluctant to let the currency fall further as it would provoke criticism at home and abroad.
Last week, net dollar buying positions on the Tokyo Financial Exchange, Japan's largest margin trading platform, had fallen almost 60 percent from a high hit in January, to stand among the lowest levels seen in the past year.
At Gaitame.com, another platform popular among margin FX traders, traders have even gone long in yen for the first time since late 2012, when Prime Minister Shinzo Abe was voted into power promising to reflate the economy through massive monetary stimulus, said Takuya Kanda, senior researcher at Gaitame.com Research.
"This may indicate a decline in their confidence in Abenomics, which has pursued a weaker yen," he said.
Weakening the yen has been considered as a pillar of Abenomics, even though officials have refrained from saying so for fear of being accused of currency manipulation by other major economic powers.
Since Abe took the office, the yen has depreciated about 35 percent against the dollar. It stood at 121.77 yen on Tuesday.
Last week, the dollar finally broke out of its long-held, tight range between 119 and 121, edging up near the eight-year high of 122.04 yen touched in March.
Given the breakout, the dollar/yen's technical outlook is bullish, usually a good time for day traders to buy dollars.
Yet, Japanese day traders are selling the dollar instead.
That could reflect a growing perception that Bank of Japan may be less keen than previously thought to use further stimulus to push the yen lower.
While many market players expect additional easing from the BOJ later this year, some traders took note of BOJ Governor Haruhiko Kuroda's comments last week that correction from the earlier excessive yen strength, prevailing before the launch of massive monetary stimulus policies, is now over.
"He said that first in the parliament and again he used the phrase in his speech two days later. It's clear that his choice of words is intentional," said Osamu Takashima, chief FX strategist at Citigroup Securities.
Many traders also suspect further weakness in the yen could irk some domestic importers and consumers, who have benefited little from rise in asset prices, while suffering from rising import prices.
The International Monetary Fund (IMF), in its annual report on Japan published earlier this month, also called for a complete policy package including structural reforms that would avoid excessive reliance on exchange rates.
Traders took that as a veiled warning against policies seeking further yen weakness.
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