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4 Jun 2013
Flash: Yen weakness likely to persist on trade deficits - Nomura
FXstreet.com (Barcelona) - Richard Koo chief economist at the Nomura Research Institute believes that Yen weakness likely to persist on trade deficits.
He begins by commenting that the share price increases driven by the prospect of improved corporate earnings due to the weaker yen will probably persist going forward. He feels that now that Japan is running trade deficits, the yen is unlikely to see the kind of appreciation observed in the past.
He adds that naturally, exchange rates are relative things, and the yen might well rise back into the 90–100 range against the USD depending on conditions in the US economy. However, he writes, “I do not expect USD/JPY to return to the area below the mid-80s. The yen’s decline to around 100 against USD has definitely been a positive for the Japanese economy. But authorities will need to tread carefully when dealing with additional yen weakness, including the question of what might stop the yen from falling further.” He sees that excessive drops in the currency could spark a “sell Japan” movement like that seen in 1997, when investors simultaneously sold off the yen, Japanese stocks, and Japanese bonds.
He begins by commenting that the share price increases driven by the prospect of improved corporate earnings due to the weaker yen will probably persist going forward. He feels that now that Japan is running trade deficits, the yen is unlikely to see the kind of appreciation observed in the past.
He adds that naturally, exchange rates are relative things, and the yen might well rise back into the 90–100 range against the USD depending on conditions in the US economy. However, he writes, “I do not expect USD/JPY to return to the area below the mid-80s. The yen’s decline to around 100 against USD has definitely been a positive for the Japanese economy. But authorities will need to tread carefully when dealing with additional yen weakness, including the question of what might stop the yen from falling further.” He sees that excessive drops in the currency could spark a “sell Japan” movement like that seen in 1997, when investors simultaneously sold off the yen, Japanese stocks, and Japanese bonds.