1 Dec 2014
Long USD/JPY – Morgan Stanley
FXStreet (Barcelona) - Analysts at Morgan Stanley believe USD/JPY will continue to rise in 2015, though at a slower pace than the past 2 years, and target 127 levels by year end.
Key Quotes
“USDJPY has come a long way in two years, rising over 50% from the 2012 lows. We think it can keep going in 2015, though at a slower pace.”
“Japan’s real effective exchange rate has already declined significantly so a weaker JPY is no longer a core objective of Japan’s policy-makers, in our view. Instead, real wage growth and productivity gains are the keys to reflation and long-term debt sustainability.”
“Domestic politics pose the key risk to the reflationary effort and USDJPY. A lack of reform would hit local asset prices and inflation expectations, leading to JPY strength.”
“But we believe that related reforms will take several years to bear fruit and JPY weakness will stabilize asset prices and inflation expectations in the meantime. We forecast 127 for USDJPY by year-end.”
“BoJ stimulus and GPIF reform should mean more outflows from Japan, weakening JPY.”
“Corporate Japan will likely continue to lean on foreign returns, until productivity-enhancing domestic reforms take hold.”
Key Quotes
“USDJPY has come a long way in two years, rising over 50% from the 2012 lows. We think it can keep going in 2015, though at a slower pace.”
“Japan’s real effective exchange rate has already declined significantly so a weaker JPY is no longer a core objective of Japan’s policy-makers, in our view. Instead, real wage growth and productivity gains are the keys to reflation and long-term debt sustainability.”
“Domestic politics pose the key risk to the reflationary effort and USDJPY. A lack of reform would hit local asset prices and inflation expectations, leading to JPY strength.”
“But we believe that related reforms will take several years to bear fruit and JPY weakness will stabilize asset prices and inflation expectations in the meantime. We forecast 127 for USDJPY by year-end.”
“BoJ stimulus and GPIF reform should mean more outflows from Japan, weakening JPY.”
“Corporate Japan will likely continue to lean on foreign returns, until productivity-enhancing domestic reforms take hold.”