- Naohiro Niimura, a partner at Market Risk Advisory Co.
The Japanese Yen is steadily loosing its ground versus the greenback, contributing to the solid performance of Japanese equity indices. Comments from the Fed members are pushing the greenback higher, while a statement of Japanese government advisory about the changes in the pension fund dragged the Yen lower. With the USD/JPY currency pair approaching a recent high around 102.82, the BoJ should feel comfortable, while the looming tax hike is adding more pressure on members.
Some of the central bank's members are starting to express their concerns about the underlying strength of the nation's exports. During the next week's meeting the spotlight will fall on sluggish exports, as Japan logged a record trade deficit in January on the back of soaring imports. The total volume of shipments is barely increased even despite weaker Yen that is brought on by Shinzo Abe's policies. Amid weakening exports, analysts are already making their bets the central bank will lower their assessment.
Though the central bank is expected to remain pat on its policy, any signs that members are becoming less confident about the export outlook and overall economic prospects will attract close market attention and provoke a massive selloff of the Yen. Nevertheless, analysts are expressing their concerns that a 20% depreciation of the Yen will drive export higher.
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