8 Jul 2013
Flash: USD/JPY maintains 110.00 year-end target – UBS
FXstreet.com (New York) - Lending activity in Japan is starting to look more encouraging – indeed, bank lending in June expanded at the fastest pace in almost four years at +1.9% YoY, notes Gareth Berry, a Research Analyst at UBS.
Admittedly the rising trend was in place before the Prime Minister Abe took office, but the concerted policy response from lawmakers and central bankers since then has probably helped keep that trend alive. Meanwhile, JGB yields remain subdued despite the sharp rise in US 10-year yields on the back of Friday's robust payrolls report.
This is in stark contrast to core 10-year bond yields in Europe and the UK which followed US yields higher. It suggests the bald arithmetic of the Bank of Japan's easing program is finally putting downward pressure on JGB yields, as the Bank of Japan buys JGBs faster than the Ministry of Finance can net issue them.
According to Berry, “This is good news for yen bears as it means Japan will likely be spared some of the involuntary monetary tightening now afflicting other developed economies and these widening yield differentials will eventually incentivize yen outflows. We keep our year-end USD/JPY forecast at 110.”
Admittedly the rising trend was in place before the Prime Minister Abe took office, but the concerted policy response from lawmakers and central bankers since then has probably helped keep that trend alive. Meanwhile, JGB yields remain subdued despite the sharp rise in US 10-year yields on the back of Friday's robust payrolls report.
This is in stark contrast to core 10-year bond yields in Europe and the UK which followed US yields higher. It suggests the bald arithmetic of the Bank of Japan's easing program is finally putting downward pressure on JGB yields, as the Bank of Japan buys JGBs faster than the Ministry of Finance can net issue them.
According to Berry, “This is good news for yen bears as it means Japan will likely be spared some of the involuntary monetary tightening now afflicting other developed economies and these widening yield differentials will eventually incentivize yen outflows. We keep our year-end USD/JPY forecast at 110.”