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2 Apr 2015
USD/JPY to reach 128 by 2015-end – BNPP
FXStreet (Barcelona) - The Research Team at BNP Paribas, notes that the increasing outflow from Japan into foreign assets will lead JPY to weaken, and further forecast USD/JPY to end 2015 at 128 and reach 135 by 2016-end.
Key Quotes
“The BoJ, like the ECB, is seeking to boost inflation expectations, although Japan’s central bank policy is a few steps ahead of the ECB’s. With the economy now operating at full capacity and Japan’s labour market becoming tight, our economics team expects the central bank to be uncomfortably successful.”
“We expect inflation to recover in 2015 and continue rising in coming years. Inflation expectations should also increase.”
“Japanese investors have been increasing their net purchases of foreign securities since the start of 2015. Net demand for foreign bonds has rebounded after repatriation in late 2014 while net demand for foreign equities continues to rise This trend will continue to weigh on the JPY, in our view.”
“With inflation expected to rise towards 2% over the next two years, even as the central bank keeps nominal rates low through JGB purchases, it will be increasingly imperative to seek yield and higher returns. The recent announcement of a new portfolio allocation by the government pension investment fund is a very clear example of this.”
“The negative outlook for Japan’s basic balance of payments suggests JPY depreciation could be uncomfortably rapid at times.”
“We expect the Ministry of Finance to use verbal warnings to keep JPY price action from becoming overly one-way, and we would not rule out USD-selling FX intervention at some stage to manage the pace of depreciation.”
“We expect USDJPY to reach 128 by the end of 2015, en route to 135 by the end of 2016.”
Key Quotes
“The BoJ, like the ECB, is seeking to boost inflation expectations, although Japan’s central bank policy is a few steps ahead of the ECB’s. With the economy now operating at full capacity and Japan’s labour market becoming tight, our economics team expects the central bank to be uncomfortably successful.”
“We expect inflation to recover in 2015 and continue rising in coming years. Inflation expectations should also increase.”
“Japanese investors have been increasing their net purchases of foreign securities since the start of 2015. Net demand for foreign bonds has rebounded after repatriation in late 2014 while net demand for foreign equities continues to rise This trend will continue to weigh on the JPY, in our view.”
“With inflation expected to rise towards 2% over the next two years, even as the central bank keeps nominal rates low through JGB purchases, it will be increasingly imperative to seek yield and higher returns. The recent announcement of a new portfolio allocation by the government pension investment fund is a very clear example of this.”
“The negative outlook for Japan’s basic balance of payments suggests JPY depreciation could be uncomfortably rapid at times.”
“We expect the Ministry of Finance to use verbal warnings to keep JPY price action from becoming overly one-way, and we would not rule out USD-selling FX intervention at some stage to manage the pace of depreciation.”
“We expect USDJPY to reach 128 by the end of 2015, en route to 135 by the end of 2016.”