21 Jan 2015
Monthly Outlook: BoJ might do a SNB to weaken Yen – Rabobank
FXStreet (Barcelona) - Michael Every of Rabobank, in his monthly outlook for Japan, notes there is speculation in the markets that BoJ might cut its deposit rates to negative to try to weaken the JPY.
Key Quotes
“One of the unspoken central platforms of Abenomics, a weaker JPY, is stalling.”
“Although no other central bank has yet showed itself willing to match the BoJ’s QE largesse, where 1.4% of GDP is being pumped into the system every month with no end-date, the ECB are clearly moving in that direction. That has helped to push EUR down already, providing Japan with export competition (or did it think it was the only central bank that would join in these currency wars?)”
“Moreover, as risk-off moves strike the market due to the same weak/deflationary global backdrop that Japan itself has so long grappled with, JPY is seeing periodic appreciation. At time of writing it pushed USD/JPY back to around 118, although it had tested 116. Indeed, the only positive to cling to is the fall in oil prices – yet they again say ‘deflation’, not ‘inflation’, rubbishing the BoJ’s claims to have reflated the economy.”
“Rumours now suggest the BoJ might dampen expectations of more QE to come in response (you can’t fight oil, it seems), and instead cut deposit rates to negative (like Switzerland) to try to weaken JPY from another angle.”
Key Quotes
“One of the unspoken central platforms of Abenomics, a weaker JPY, is stalling.”
“Although no other central bank has yet showed itself willing to match the BoJ’s QE largesse, where 1.4% of GDP is being pumped into the system every month with no end-date, the ECB are clearly moving in that direction. That has helped to push EUR down already, providing Japan with export competition (or did it think it was the only central bank that would join in these currency wars?)”
“Moreover, as risk-off moves strike the market due to the same weak/deflationary global backdrop that Japan itself has so long grappled with, JPY is seeing periodic appreciation. At time of writing it pushed USD/JPY back to around 118, although it had tested 116. Indeed, the only positive to cling to is the fall in oil prices – yet they again say ‘deflation’, not ‘inflation’, rubbishing the BoJ’s claims to have reflated the economy.”
“Rumours now suggest the BoJ might dampen expectations of more QE to come in response (you can’t fight oil, it seems), and instead cut deposit rates to negative (like Switzerland) to try to weaken JPY from another angle.”