Back
20 Apr 2015
USD/JPY year-end forecast at 125 – Rabobank
FXStreet (Barcelona) - Jane Foley, Senior Currency Strategist at Rabobank, views that the policy divergence between BoJ and the Fed might push USD/JPY higher towards 125 by year-end.
Key Quotes
“The forthcoming slew of Japanese corporate earnings results will provide a reading of how yen weakness has been boosting the country’s external sector; trade data are also due this week."
“Although official data have indicated that the economy has only just managed to limp away from last year’s consumption tax induced recession, BoJ Governor Kuroda has maintained an optimistic tone. At a speech over the weekend, Kuroda commented that “QQE implemented by the BoJ is having the intended effects and the economy is making steady progress on its way to conquering deflation”.”
“In reality, Japan still has next to no inflationary pressure once the impact of the consumption tax rise is accounted for.”
“That said, on the back of blatant government pressure there are signs that large firms have offered generous pay awards to worker in the spring (shunto) wage round. The Keidanren business lobby suggests that nominal wages in large firms will rise by 2.6% y/y this year, the biggest gain since 1998. This should help counter the trend which has pushed real wages lower for almost 2 year and could be an important step forward in the battle against the deflationary mindset.”
“That said, we expect that the BoJ will resort to more easing this year. In view of the expected divergence between BoJ and Fed policy, we see risk of a move towards USD/JPY125 by year end.”
Key Quotes
“The forthcoming slew of Japanese corporate earnings results will provide a reading of how yen weakness has been boosting the country’s external sector; trade data are also due this week."
“Although official data have indicated that the economy has only just managed to limp away from last year’s consumption tax induced recession, BoJ Governor Kuroda has maintained an optimistic tone. At a speech over the weekend, Kuroda commented that “QQE implemented by the BoJ is having the intended effects and the economy is making steady progress on its way to conquering deflation”.”
“In reality, Japan still has next to no inflationary pressure once the impact of the consumption tax rise is accounted for.”
“That said, on the back of blatant government pressure there are signs that large firms have offered generous pay awards to worker in the spring (shunto) wage round. The Keidanren business lobby suggests that nominal wages in large firms will rise by 2.6% y/y this year, the biggest gain since 1998. This should help counter the trend which has pushed real wages lower for almost 2 year and could be an important step forward in the battle against the deflationary mindset.”
“That said, we expect that the BoJ will resort to more easing this year. In view of the expected divergence between BoJ and Fed policy, we see risk of a move towards USD/JPY125 by year end.”