Yen rallies as Japan remain in recession

The Japanese Yen was the big mover in Asia, with a shockingly disappointing Japanese GDP in Q3, the catalyst to see an initial rally in Yen crosses before a nasty turnaround, as long term Yen bears locked in profits and a 'buy the rumour sell the fact' play developed.

USD/JPY opened Asian in a bullish tone, paring some of Friday's US retail sales-led losses ahead of Japan's Q3 growth figures. The miss was quite appalling, with GDP (QoQ) for the third quarter printing -0.4% vs +0.5% exp and -1.9% (revised lower) in Q2, and an annualized read of 1.6% vs +2.1 exp.

The initial reaction was Yen negative, Y 117.00 being paid against the USD, before a massive wave of selling in USD/JPY caught the market by surprise, sending the rate as low as 115.47 before a modest bounce towards 115.75/85.

While today's GDP data makes the planned sales tax hike delay/snap election in Japan a done deal - chatter is Abe will announce it tomorrow - , the scenarios were fully discounted last week, leading to higher risks of a 'buy the rumour, sell the fact' response in both Yen crosses and Nikkei 225.