I have been long Yen for a significant period of time. Today I have taken the position off. Why?

My pimary reasons for having it on were:

1. Massive repatriation to plug balance sheet holes at home and the better tax treatment on repatriated funds after 1 April.
2. Japan's relative "safe haven" status of the Yen.
3. Technicals strongly suggested a new long term high (below 79 vs the USD)

Lets deal with these one by one.

1. I think that this has largely taken place. The need for funds especially at banks has been so great that this has already happened. So that leaves the more structural offshore assets. When I recently met with Mr Saji (Chief Economist at Mitsubishi UFJ Bank) we discussed this issue. According to him there is some Yen 17 trillion sitting offshore but that most of it is invested in fixed assets and it is only the assemblers like Canon and Panasonic that have cash. His checks have persuaded him that this is not going to be a factor and that as long as the domestic investment picture in Japan remains bleak there is no incentive for these funds to move home. I am inclined to agree with him.

2."Safe haven"? Japan is probably in a Depression already, the first of many nations to go there. Its export engine has ground to a halt. It has swung from current a/c surplus to deficit in a big way. The government has the lowest approval rating in history and there is no viable leadership elsewhere. the bankruptcy this week of SFCG may open the floodgates to much more systemic type bankruptcies. Japanese banks credit cost assumptions are way off the mark in my opinion. They all need capital injections urgently. Mizuho has had to pay a 14% yield on its recent issue!The financial system in Japan is once again in crisis. The global crisis has simply masked this to some extent.

3. The technical call is very much a long term one. The high was made in April 1995 and all the action since is probably a huge "supercycle degree" 4th wave, which could easily still be in progress for several more years. So we may still see a new high but not for a long time.

This change of heart has massive implications for my big picture view on things. I do not view the US dollar as a "safe haven" currency and I do not believe that its recent rise is really more than speculative/relative and a result of the deleveraging process. So if there is now NO safe haven currency. GOLD'S recent rise is complementary to that view. I started to go long GOLD two weeks ago for the first time in a long while. More on GOLD later.