12 Dec 2014
Election to support USD/JPY? – BTMU
FXStreet (Barcelona) - Derek Halpenny, European Head of GMR at Bank of Tokyo-Mitsubishi UFJ, notes that the most likely market reactions indicate towards a rise in Nikkei and the USD/JPY pair post the Japanese elections.
Key Quotes
“After the last eight elections, the Nikkei (five times), USD/JPY (five times), and JGBs all rose (four times). This shows a slight tendency for snap elections to support Nikkei and USD buying and for the momentum to continue. The JGB market may remain calm despite the enthusiasm for shares and USD.”
“In our last monthly report, our USD/JPY forecast range was 113.00 – 122.00. Now, however tentatively, USD/JPY may be working its way to 125.00. The Nikkei may also approach the 20,000 level. But even so, the benchmark JGB yield may remain at about 0.45% - 0.50%.”
“The results of Sunday’s snap election will be important. Over the next one-to-two month honeymoon period, USD/JPY’s recent upbeat momentum may be sustained. However, Cabinet minister nominations (through end-December) and the January BoJ meeting (January 21) may cause USD/JPY to pause. The FY15 budget issue is already behind schedule because of the election. The MoF will likely announce the FY15 JGB issuance plans in late January. Structural reforms in essence take a long time to implement. Market expectations are likely to diminish after the honeymoon period. In theory, there is nothing to support USD/JPY over the 130.00-level, well out of the +15% PPP upper limit on the corporate price index, despite being lifted by the BoJ’s Halloween QEII bazooka and the reshuffling of the GPIF.”
Key Quotes
“After the last eight elections, the Nikkei (five times), USD/JPY (five times), and JGBs all rose (four times). This shows a slight tendency for snap elections to support Nikkei and USD buying and for the momentum to continue. The JGB market may remain calm despite the enthusiasm for shares and USD.”
“In our last monthly report, our USD/JPY forecast range was 113.00 – 122.00. Now, however tentatively, USD/JPY may be working its way to 125.00. The Nikkei may also approach the 20,000 level. But even so, the benchmark JGB yield may remain at about 0.45% - 0.50%.”
“The results of Sunday’s snap election will be important. Over the next one-to-two month honeymoon period, USD/JPY’s recent upbeat momentum may be sustained. However, Cabinet minister nominations (through end-December) and the January BoJ meeting (January 21) may cause USD/JPY to pause. The FY15 budget issue is already behind schedule because of the election. The MoF will likely announce the FY15 JGB issuance plans in late January. Structural reforms in essence take a long time to implement. Market expectations are likely to diminish after the honeymoon period. In theory, there is nothing to support USD/JPY over the 130.00-level, well out of the +15% PPP upper limit on the corporate price index, despite being lifted by the BoJ’s Halloween QEII bazooka and the reshuffling of the GPIF.”