Politics interferes again – Rabobank

Just as hopes were building that some of the recent volatility in USD/JPY was on course to die-back, Japanese political change has proved that the currency pair maintains a nervous disposition, Rabobank’s FX strategist Jane Foley notes.

USD/JPY to reach 140 in 3 to 6 months

“Despite the changing political landscape both the Japan and in the US, we would expect central bank policy to remain the primary driver of USD/JPY over the coming months. US economic data will be watched for any signs that the US could repeat its 50 bps rate cut before the end of the year, while Japanese numbers will be assessed against the expectation that BoJ interest rates will be raised again around the turn of the year.”

“The reassurance from Ishiba that the government would announce further fiscal stimulus ‘if necessary’ should be reassuring to JPY bulls. Ishiba’s goal that the country ‘fully emerge from deflation’ is also JPY supportive. Ishiba on Friday reportedly vowed to accelerate Kishida policies which aimed to boost household consumption through higher wage growth.”

“This sets the scene for another strong round of wage talks next spring. We continue to target USD/JPY140 on a 3-to-6-month view.”