Comments from Morgan Stanley on the yen, the bank is looking for a stronger JPY
(this in brief)
the magnitude of the USDJPY advance witnessed over recent weeks has surprised us.
JPM offer 2 reasons (beyond the regular 'risk off' argument for why yen declined:
- Japan's pension funds buffered pay out pressure via their high cash reserves, and think once the reserves are exhausted these pension funds will reduce assets funding pension obligations
- Total samurai issuance for Japan's current fiscal year (due to end March 31) reached JPY2.427 trn (USD22bln) ... slowing global economy will reduce this JPY weakening flow
Looking ahead
- we ... see that the lack of policy tools in the next downturn may be a G10, and not an exclusively European, issue. Markets may not have yet understood what the lack of monetary policy tools may mean for market liquidity conditions.
- We underline our risk bearish view and see the JPY appreciating from here. Our AUDJPY and USDJPY shorts should soon start to perform
