28 Nov 2014
Yen to become a political football– BTMU
FXStreet (Barcelona) - According to Derek Halpenny, European Head of Currency Strategy at the Bank of Tokyo Mitsubishi UFJ, the markets should be prepared to see volatility in Yen due to the upcoming elections on the 14th of December, with a probability of further depreciation.
Key Quotes
“The usual last Friday of the month deluge of data from Japan today included inflation data that revealed a further moderation in inflation. The nationwide core annual CPI rate, excluding the impact of the sales tax increase slowed from 1.0% to 0.9% in October and down from 1.5% in April.”
“USD/JPY is higher today, but be prepared for the yen to become a political football in the run up to the election on 14th December.”
“The DPJ are focusing on negative aspects of Abenomics and highlighting the negative hit to incomes from rising import prices. LDP Secretary General Tanigaki today stated that it was not desirable for the yen to move rapidly.”
“The government’s rhetoric over yen weakness may well focus more on the negative aspects in the run up to the election, which may act to limit yen selling. But ultimately as we have said before, it’s what you do and not what you say and in that sense, the yen still has scope to depreciate further, perhaps after the general election though.”
“Clearly, judging from the cross-border flow data, foreign investors’s belief in Abenomics has been revived. Foreign investors bought JPY 735bn worth of Japanese equities last week and have now bought a total of JPY 3.6trn in the last four weeks, or about USD 30bn. No doubt these investors have been heavy yen sellers too, ensuring the equity exposure is fully hedged.”
Key Quotes
“The usual last Friday of the month deluge of data from Japan today included inflation data that revealed a further moderation in inflation. The nationwide core annual CPI rate, excluding the impact of the sales tax increase slowed from 1.0% to 0.9% in October and down from 1.5% in April.”
“USD/JPY is higher today, but be prepared for the yen to become a political football in the run up to the election on 14th December.”
“The DPJ are focusing on negative aspects of Abenomics and highlighting the negative hit to incomes from rising import prices. LDP Secretary General Tanigaki today stated that it was not desirable for the yen to move rapidly.”
“The government’s rhetoric over yen weakness may well focus more on the negative aspects in the run up to the election, which may act to limit yen selling. But ultimately as we have said before, it’s what you do and not what you say and in that sense, the yen still has scope to depreciate further, perhaps after the general election though.”
“Clearly, judging from the cross-border flow data, foreign investors’s belief in Abenomics has been revived. Foreign investors bought JPY 735bn worth of Japanese equities last week and have now bought a total of JPY 3.6trn in the last four weeks, or about USD 30bn. No doubt these investors have been heavy yen sellers too, ensuring the equity exposure is fully hedged.”