Yen bulls are a rare breed these days, what with investors almost universally sold on the prospect of dramatic monetary stimulus from Japan.
But they are out there, one at one firm, they are speaking up.
"We think the latest reasoning for being negative on JPY – the upcoming election and likely change of government – is no better founded than the economic reasons that have driven the consensus view (wrongly) for most of the last four years," say the strategists at RBC Capital Markets.
These pros argue that while the stimulus-minded LDP party may win the upcoming election, "the Japanese electorate is unlikely to deliver the resounding LDP victory widely assumed and even if it does, political inertia will make it very difficult to deliver the revolutionary change in policy that is expected to usher in a new era of JPY weakness."
There are other factors too. The strategists point out that Japan is still running a current account surplus, which would argue against currency weakness. Also, they say, indicators of investor positioning "suggest short JPY is the most crowded trade in G10 at end-2012." That means any event that diverts from what investors are expecting in Japan, and points to a more bullish outlook, could cause lots of short covering and a sharp about-face for the yen.