© Josh O'Byrne
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I believe the door to further monetary activism is certainly not closed, but the trigger at present is less obvious. The foreign exchange market and energy volatility have clouded the inflation picture alongside the impact from the sales tax hike. Moreover, policy makers will look through these transitory factors and try to gauge the underlying trend. In case more disinflationary forces re-emerge, policy makers may opt to expand the balance sheet further or look for ways to narrow risk premium onwards with other tools.
Given that Japan has just emerged from recession with a modest expansion, what do you anticipate from the Yen for the rest of this year?
We expect JPY to be relatively sidelined, with influence coming more from external factors. Investors remain split as to whether more easing will be forthcoming in the near term, but against the current backdrop we see a relatively high bar. Even though such discussion could intensify toward the end of the year, political matters are dampening the potential in nearer term.
What are your forecasts for USD/JPY and EUR/JPY in a longer term perspective?
Our long term forecasts for the USD/JPY currency pair is 135. Talking about the EUR/JPY, we expect it to be at 128 levels.