 Okay, hi everyone just wanted to jump on because there's been some breaking news as you can see to the side of me here Shinzo Abbi the Prime Minister of Japan has just resigned for health reasons This isn't the first time actually. He did resign back in 2007 for actually the same reason He suffered for many years for or from Ulcerative colitis which is an inflammatory bowel disease But his condition is said to have worsened recently I think he's been back and forth in hospital over the course of the last week He does though resign now as Japan's longer-serving Prime Minister. His current period in office began in 2012 Again, he was previously but there but he had to step down back in 2007 was when he Previously had a flare-up of this case at this point in time. I can't really see him coming back again But we wish him wish him and his family well, of course, and I hope he makes a speedy recovery But the big question here for traders is really what does this mean? We've seen the Japanese yen appreciate quite considerably so far this morning So I wanted to just quickly cover off a few basics about Abonomics which is the main thing and reason why the market is reacting and the yen might perhaps if you're not used to markets Or Japanese policy be slightly counter-intuitive because the currency is actually strengthening from his resignation And I'll explain why first of all Abbe a bit of background about him as a character It's got a bit of a reputation as a staunch conservative and a nationalist and for stimulating growth with aggressive Economic policy and that economic policy is called Abonomics Abbe and his cabinet as a timeline here They will continue to run the government until a new premier is elected But could not adapt or adopt any new policies the winner of the party election would then hold a post until the end of Abbe's LDP term, which is in September of 2021 He was asked who's going to replace him this morning in a press conference and he said it's not his choice going forward All right. Well, what is Abonomics is the main thing? Abonomics is a set of policies that came up when he introduced him in Coming into power in 2012 and basically it follows what we call three arrows the old age kind of Japanese thinking that three is stronger than one in terms of unified policy approach is kind of the the idea here and the main one of this and the one of which markets are particularly sensitive to is the first arrow and the First arrow is Monetary policy Monetary policy Japan's hyper easy monetary policy in the form of negative short-term interest rates was put in place to make it Cheaper for consumers and companies to borrow money and spend so one of the main things here was when this Abonomics was first adopted in 2012. We did actually see some early optimism in markets contributing to a doubling of Japanese stocks In the equity market and the slump in the currency boosted by tourism The actual goal here ultimately was to spur inflation, which has always remained particularly elusive in Japan despite the amount of monetary easing which they've conducted Proponents of Abonomics see then that Japan's mammoth purchases of government debt is really the only way to shake off the threat of deflation and avoid more stagnation in their economy now a Couple of things have happened since then obviously the Bank of Japan as we know move rates into negative territory as of early 2016 in order to further encourage spending and that's now been pushed back The projected time frame for reaching its 2% percent inflation goal no fewer than I think six times or so, you know, we talk about the Fed and their policy tweet we had Yesterday, of course now we're averaging that out and this is a real reason why in Japan for example They continue to miss that target Other Abonomic policies include cutting corporation taxes urging Japan's state pension fund to buy riskier assets as well So the other two arrows here other than monetary policy is fiscal stimulus pumping money into the economy Which means the government spending more money on things like infrastructure financial incentives to companies like tax breaks As I just mentioned and then structural reforms structural reforms would be corporate form adding more women into the workplace labor Liberalization allowing migrants into the workforce all these other things to help accelerate economic growth Now if we actually look at the market, then how is it reacted so far if I just quickly switch over my screens This has been the initial reaction I'm looking here at Dolly Yen in the futures market and you can see as soon as those news reports started to come out the timing of this has been basically An initial news report overnight Speculating and then he later came out and house confirmed in the press conference officially that he is resigning due to ill health So the yen has been strengthening. We got close up to around the 107 handle Initially, you can see then in terms of this recent price movement that we have had in Dolly Yen largely driven by obviously weakness If you like initially in the dollar, but then the dollar came back over overnight some of this idea about with the Yields curve steepening as I discussed in the briefing this morning We moved up. However, now the yen is kind of taken over on the back of this news And and all of this is basically on the back of the fact that it's going to be an unwinding perhaps of abonomics and this whole push and quest for hyper easy monetary policy going forward and so just Resulting as well on some repatriation flows back into the yen And so yeah, we're right back down. We've lost already about 100 pips plus at the moment We're down the s1 on the daily pivots in a longer time frame looking on the weekly Where we Briefly flirted with back on around this time last month on the 27th It's quite an interesting technical point if the yen does continue to strengthen against the dollar And that could well possibly be the case because generally the dollar is is somewhat in a weakened State fundamentally now given the low rate mentality that's being adopted by average inflation targeting So if the yen does start to strengthen That would be a key level to look out for run 0 4 14 here looking on the weekly candlesticks here at dolly end You can see the market has respected this at multiple times over the course of several years We then had the actual Pandemic low point when we were in right in the midst of that volatility period That was when equities were really selling off hard globally So people flocking to the traditional safe havens like the yen And that was when we hit that original low 101 14 I have actually seen banks like jp morgan being out in recent times speculating that if Abbey were to resign and then the Let's say the disintegration of avanomics then potentially we could see a 100 dollar yen Price point no specific time frame there, but And that's a long way off, but not massively unrealistic. We were trading back around those levels only in around 2016 type era So yeah, a couple of long-term considerations there In terms of his replacement I'm going to put a link into this video if you want to have a read a bit more specifically about who those replacements are What is their background? What is their political leaning and therefore what is the potential for the longevity or not of avanomics? That's going to be really key is who is his replacement and if I jump to This article here at some Reuters Tara asso the the finance minister Also doubles up as the deputy prime minister There's a few others as well the hawkish former defense minister The foreign minister. I'll let you consume this in your own time We're probably not going to have anything immediate. There's going to be lots of jostling of course for political advantage here I'm sure even within His own party, but this would definitely be worth reading in advance of that to really understand a bit more how the yen might react Yeah, then there's been a couple of good tweets as well That I've been resharing my twitter handle is here, so feel free to check that out But look short sharp. I hope that was useful gets you up to speed with things just generally And uh, yeah change that abbey has has resigned Take care