16 Feb 2015
USD/JPY should recover 120 relatively quickly - Nomura
FXStreet (Bali) - Following last week's headline-driven sell-off in USD/JPY, Nomura notes that it is unlikely to see imminent changes in both BOJ’s monetary policy stance and GPIF’s FX hedging policy, suggesting USD/JPY should recover 120 relatively quickly.
Key Quotes
Last week, Bloomberg reported possible changes in BOJ’s view on JPY weakness and further stimulus (unconfirmed). Bloomberg also reported a possible introduction of FX hedging by the GPIF (unconfirmed), which also put downside pressure on the USD/JPY."
"We are very sceptical about any imminent changes in both BOJ’s monetary policy stance and GPIF’s FX hedging policy, and we expect the USD/JPY to recover to 120 relatively quickly."
"While it may be true that some of BOJ members see downside impact of JPY weakness on the economy, we do not believe this view has becamo the consensus among BOJ board members. Governor Kuroda is very likely to remain more balanced view on the impact of JPY weakness at the press conference this week."
"Even though media article suggests some BOJ officials became more negative for further easing, Governor Kuroda is very likely to leave the door open for further stimulus when necessary. In fact, the BOJ board is now becoming even more dovish, after the appointment of a new board member, Professor Harada."
"An unchanged view from Governor Kuroda will likely be viewed as USD/JPY positive contradicting these media reports on possible changes in the BOJ's stance on JPY weakness and further stimulus."
"While one of GPIF’s investment committee members, Ms. Shimizu, thinks the GPIF should start FX hedging in her interview with Bloomberg, compared with the chair (Mr Yonezawa) and the vice chair (Mr Horie), her influence on the committee decision should be much smaller. Even if the GPIF is considering the possibility, the process to change FX hedging policy of the big fund is unlikely to take place in the short time horizon."
"Pension funds are clearly accelerating their foreign investment since Q4 last year, and their accelerated foreign investment remains unhedged, supporting the USD/JPY this year."
Key Quotes
Last week, Bloomberg reported possible changes in BOJ’s view on JPY weakness and further stimulus (unconfirmed). Bloomberg also reported a possible introduction of FX hedging by the GPIF (unconfirmed), which also put downside pressure on the USD/JPY."
"We are very sceptical about any imminent changes in both BOJ’s monetary policy stance and GPIF’s FX hedging policy, and we expect the USD/JPY to recover to 120 relatively quickly."
"While it may be true that some of BOJ members see downside impact of JPY weakness on the economy, we do not believe this view has becamo the consensus among BOJ board members. Governor Kuroda is very likely to remain more balanced view on the impact of JPY weakness at the press conference this week."
"Even though media article suggests some BOJ officials became more negative for further easing, Governor Kuroda is very likely to leave the door open for further stimulus when necessary. In fact, the BOJ board is now becoming even more dovish, after the appointment of a new board member, Professor Harada."
"An unchanged view from Governor Kuroda will likely be viewed as USD/JPY positive contradicting these media reports on possible changes in the BOJ's stance on JPY weakness and further stimulus."
"While one of GPIF’s investment committee members, Ms. Shimizu, thinks the GPIF should start FX hedging in her interview with Bloomberg, compared with the chair (Mr Yonezawa) and the vice chair (Mr Horie), her influence on the committee decision should be much smaller. Even if the GPIF is considering the possibility, the process to change FX hedging policy of the big fund is unlikely to take place in the short time horizon."
"Pension funds are clearly accelerating their foreign investment since Q4 last year, and their accelerated foreign investment remains unhedged, supporting the USD/JPY this year."