UBS - "A second wave of USDJPY buying is due. Japanese real money is still waiting in the wings and the life insurance industry in particular still has yen to sell.
Lifers maintain FX hedges worth about US$340 bn but one-by-one the incentives to trim these are falling into place. Admittedly, hedging costs are still very low. But yield spreads are rising, lifer risk tolerance has improved, and the yen has embarked on what we believe is a long-term downtrend.
Scope: A return to pre-crisis hedge ratios over time could eventually trigger about US$155 bn worth of yen selling.
Timing: The arrival of the new fiscal year on April 1st provides a good opportunity for lifers to review hedging practices. A fresh wave of USDJPY buying could follow soon afterwards − encouraged further by another round of easing from the Bank of Japan likely on April 4th.
We look for further USDJPY upside and keep our year-end forecast at 100."