Fresh off the printing presses, and hot on the heels of Ryan’s Japanese election post, comes this client note from the Morgan Stanley analysts, courtesy of our friends at efxnews.com
Polls suggest PM Abe’s coalition could obtain a two-thirds majority in the diet as a result of this Sunday’s election. While a strong election result will increase hopes that PM Abe will introduce structural reform swiftly, markets seem to have priced this in.
PM Abe clarified that reform can only come with the support of the population and this support could erode quickly should the economy weaken due to Japan’s Asian trading partners. Thus we believe that the market expectation that Abe wins the election, and then swiftly implements reforms, leaves room for disappointment. Should Japan’s trading partners stay economically weak, investors may get increasingly nervous.
Currently, the performance of the JPY is mainly driven by the Japanese equity outlook. Should weak Asian data undermine local equity markets, including Japan, the chance of a significant but temporary JPY rally would be high.
We believe this could provide a tradable opportunity over the next few weeks**
** I’m guessing they mean buy the USDJPY dip should we see it
I’m done for the week. Have a good session and a great weekend and thanks for all your brilliant support again
See you all on Monday and hey,
