EUR/JPY: Bank of Japan to play key role, 6M target at 140 - Danske Bank
|According to analysts from Danske Bank, Bank of Japan’s quiet tapering and personnel changes add uncertainty. They see EUR/JPY at 146 in 12 months.
Key Quotes:
“Growth momentum in Japan has been strong recently and the economy has now expanded for seven consecutive quarters – the longest economic upturn since the beginning of the 2000s. Growth is being driven primarily by the global economic recovery, which on the back of the relatively weak yen is pushing exports to their strongest streak since the big rebound in the global economy in 2010. We expect to see growth closer to trend as fiscal stimulus wanes. We forecast 1.7% in 2018 and 1.0% in 2019.”
“Our main scenario expects the BoJ to keep its policy unchanged, maintaining the short-term policy interest rate at -0.1% and the 10Y Japanese government bond (JGB) yield at 0% over our 12M forecast horizon, assuming BoJ governor Haruhiko Kuroda is reappointed when his term ends in April.”
“Focus in the coming weeks is likely to be on BoJ’s personnel changes as Kuroda’s term ends on 8 April and Deputy Governor Iwata and Nakaso terms end on 19 March. The cabinet with the consent of the Diet appoints the BoJ governor and deputy governors. All three personnel changes are likely to be discussed at the same time (as was the case five years ago when
the three were appointed at the same time). It is widely expected that the decision will be made before the end of February. If Kuroda is reappointed (in line with Danske Bank and consensus), the reaction in JPY should be Limited”
“The direction for the JPY will largely be determined by the policies pursued by the Bank of Japan (BoJ). If Kuroda is reappointed, we expect the BoJ to keep its policy unchanged, which would lead to a weaker JPY. We target EUR/JPY at 134 in 1M, 136 in 3M, 140 in 6M and 146 in 12M.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.