8 Apr 2014
Corporates see upside risk for USDJPY - Nomura
FXStreet (Bali) - In view of Nomura FX Strategists, Japanese firms see more upside risk in USD/JPY.
Key Quotes
"The BOJ Tankan suggested Japanese firms' assumed USDJPY will remain conservative for FY14, at 99.48 on average, which is lower than the actual average during the survey period (102.33). The assumed rate for H2 FY13 was 99.06 and thus, Japanese firms expect USDJPY appreciation to slow."
"However, we judge most Japanese firms see more upside risk than the BOJ Tankan survey suggests. Our latest client survey showed corporates (mostly Japanese in this survey) are less bullish on USDJPY than other investor types. 17% of corporate clients expect USDJPY to trade below 100 at end-2014, while only 1% of non-corporate clients expect the same. Thus, it is probably true that Japanese firms have a slight conservative bias compared to other investors."
"Nonetheless, the majority of corporates (61%) expect USDJPY to trade above 105 at end-2014. More corporates clearly see upside risk for USDJPY than downside risk. In addition, Japanese firms have been setting an assumed USDJPY rate at a lower level than spot during the surveys, since 2012. They are likely to have a conservative bias for the official assumed rate to not downgrade their earnings due to a small decline in USDJPY. Thus, it is not surprising that they have more aggressive USDJPY target internally, especially after the rise in the USDJPY since late 2012."
"Thus, we do not expect Japanese exporters to rush to sell USDJPY at the current level, even though USDJPY trades much higher than the assumed USDJPY rate based on the BOJ Tankan. As the trade balance remains subdued in Japan, importers' JPY selling should be a more important factor for USDJPY."
Key Quotes
"The BOJ Tankan suggested Japanese firms' assumed USDJPY will remain conservative for FY14, at 99.48 on average, which is lower than the actual average during the survey period (102.33). The assumed rate for H2 FY13 was 99.06 and thus, Japanese firms expect USDJPY appreciation to slow."
"However, we judge most Japanese firms see more upside risk than the BOJ Tankan survey suggests. Our latest client survey showed corporates (mostly Japanese in this survey) are less bullish on USDJPY than other investor types. 17% of corporate clients expect USDJPY to trade below 100 at end-2014, while only 1% of non-corporate clients expect the same. Thus, it is probably true that Japanese firms have a slight conservative bias compared to other investors."
"Nonetheless, the majority of corporates (61%) expect USDJPY to trade above 105 at end-2014. More corporates clearly see upside risk for USDJPY than downside risk. In addition, Japanese firms have been setting an assumed USDJPY rate at a lower level than spot during the surveys, since 2012. They are likely to have a conservative bias for the official assumed rate to not downgrade their earnings due to a small decline in USDJPY. Thus, it is not surprising that they have more aggressive USDJPY target internally, especially after the rise in the USDJPY since late 2012."
"Thus, we do not expect Japanese exporters to rush to sell USDJPY at the current level, even though USDJPY trades much higher than the assumed USDJPY rate based on the BOJ Tankan. As the trade balance remains subdued in Japan, importers' JPY selling should be a more important factor for USDJPY."