Yann Quelenn
Swissquote Bank Ltd
The USDJPY has been increasing since the last week of November and is now monitoring stronger levels below 114 yen for one single dollar note. The yen is getting weaker but remains way too strong for the Bank of Japan to start normalizing its monetary policy. The central bank is in all-in mode and the effect on the yen is still mixed. One very important thing needs to be said. It is that the day when the BoJ will even hint at a possible normalization of the monetary policy, the yen will likely spike disrupting all the strategy from the Japanese Central Bank.
We then believe that, the BoJ will remain in a “dovish mode” until inflation will have killed part of its debt. This can take years even decades. Hence, the BoJ is condemned to follow the path of the Fed or the ECB. Inflation is what BoJ officials are running for. Shinzo Habe recently declared that wages increase of 3% in order to boost consumer prices which in the end will have a positive impact on the debt. BoJ knows that inflation is now mandatory to kill the massive debt. It is still a long way to go. And the BoJ knows looks towards the US hoping for several Fed rate hike next years.
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This report has been prepared by Swissquote Bank Ltd and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by Swissquote Bank Ltd personnel at any given time. Swissquote Bank Ltd is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.
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