Is the yen's undervaluation justified? What's next? - BofA
Bank of American on the yen
Bank of America Global Research discusses the JPY outlook and sees a scope for further decline over the medium-term.
"JPY has fallen around 7%ytd vs USD, and has been the weakest G10 currency. In June 2015, the Bank of Japan's Governor Haruhiko Kuroda noted the yen was not likely to weaken much further on a real effective exchange rate basis - a comment which in fact marked the yen's bottom. However, the yen's cyclical bottom has depreciated over time as Japangradually lost its presence in the global economy," BofA notes.
"We do a sanity check on JPY weakness and observethat the yen's cyclical weakness to date is justified. This suggests JPY'sperceived cheapness can extend over the next 12 months as we expect a widening policy divergence and higher commodity prices," BofA adds.