USD/JPY: Upside limited on Abenomics doubts - MUFG

Analysts from The Bank of Tokyo-Mitsubishi UFJ, see a neutral bias for the USD/JPY  pair (between 103.00 and 108.00), as doubts on Abenomics are likely to persist capping the upside.

Key Quotes:

“Prime Minister Shinzo Abe is expected to unveil his economic policy package after his big win in the Upper House election. The package is widely expected to include stimulus of JPY10-20 trillion. But stimulus measures after the Lehman Brothers collapse fell short, and deflation became even more entrenched. Investors are focusing mostly on Abe’s planned reforms.”

“The new Cabinet lineup will be introduced August 3, and incoming ministers will be expected to tackle structural reforms and support a higher Nikkei and USD/JPY. While the initial reaction may be positive, we think the sustainability of an economic policy package may be in doubt.”

“The Fed and BoJ are not expected to make any policy moves next week. USD/JPY topside may be limited by JPY buying among exporters and investor JPY repatriation moves.”