JPY: Ito’s comments make sense to us - MUFG

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Jan 13, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    FXStreet (Delhi) – Derek Halpenny, European Head of GMR at MUFG, notes that Takatoshi Ito, a former colleague of BOJ Governor Kuroda at the MOF and the person who led the panel that provided advice and recommendations on the reform of GPIF spoke on the yen in an interview with Bloomberg over the weekend.

    Key Quotes

    “In the interview he stated that the current strength of the yen was not a problem for the authorities but that this would probably change if it went to 115.00 "and then heads on to 110". This is the first discussion we can recall of late from an official on the Japanese yen and while Ito-san is not currently a government or central bank official, we think his comments are worth noting.

    As we have highlighted here recently on a number of occasions, the yen is surging on a TWI basis. The BOJ NEER is up 7.3% over the last month and is 13.2% higher from the low in June of last year. With the depreciation of the yen triggered by the second round of QQE in October 2014 now fully reversed, the BOJ could quickly become uneasy with yen strength. We would agree with Ito-san that a breach of 115.00 in USD/JPY may well spark an escalation of rhetoric on the yen. The current strength of the yen coupled with the renewed tumble in oil prices is an unwanted mix for the BOJ and if sustained will undermine further its 2.0% inflation goal.”
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