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14 Apr 2015
Changing rhetoric from Tokyo? – BTMU
FXStreet (Barcelona) - Derek Halpenny, European Head of GMR at Bank of Tokyo-Mitsubishi UFJ, argues that the recent shift in rhetoric from Abe administration regarding the value of Yen might be indicative of an agreement in the TPP trade deal with the US.
Key Quotes
“… Hamada-san has repeated the view today in a Bloomberg interview that an exchange rate of 105.00 for USD/JPY would be “appropriate” from the context of ‘fair-value’.”
“He also appears to try and burst any speculation of BOJ easing at the upcoming monetary policy meeting on 30th April by stating that there is no need to “force” inflation to get up to the inflation target.”
“Of course as FX analysts, we here feel compelled firstly to state that from a ‘fair-value’ perspective Hamada-san is correct – in fact based on our own internal PPP valuation model for USD/JPY, we estimate that USD/JPY at the 120.00 level is actually around 27% over-valued.”
“But most of us know that and the more pertinent question to ponder here is why did the Abe administration (assuming some coordination here) choose now to more explicitly shift the rhetoric on the yen away from complete ambivalence or even encouragement of yen depreciation to one more of suggesting enough is enough?"
“Japan and the US are currently at a key stage of negotiations in regard to a TPP trade deal ahead of PM Abe’s visit to Washington to see President Obama on 28th April. PM Abe will then have the honour of addressing a joint session of Congress on 29th April. It is hard to envision this taking place under a cloud of failure on reaching a deal on TPP.”
“Has a deal been done and is a shift in rhetoric on the yen in Tokyo one of the quid pro-quos in reaching a deal on TPP? Then Hamada-san’s comments make a lot of sense.”
“…we don’t doubt for one moment the fact that Japan would only agree to something that they feel was ultimately in its own interest. And Tokyo may well feel now is the correct time from the domestic standpoint on the yen to change tack.”
Key Quotes
“… Hamada-san has repeated the view today in a Bloomberg interview that an exchange rate of 105.00 for USD/JPY would be “appropriate” from the context of ‘fair-value’.”
“He also appears to try and burst any speculation of BOJ easing at the upcoming monetary policy meeting on 30th April by stating that there is no need to “force” inflation to get up to the inflation target.”
“Of course as FX analysts, we here feel compelled firstly to state that from a ‘fair-value’ perspective Hamada-san is correct – in fact based on our own internal PPP valuation model for USD/JPY, we estimate that USD/JPY at the 120.00 level is actually around 27% over-valued.”
“But most of us know that and the more pertinent question to ponder here is why did the Abe administration (assuming some coordination here) choose now to more explicitly shift the rhetoric on the yen away from complete ambivalence or even encouragement of yen depreciation to one more of suggesting enough is enough?"
“Japan and the US are currently at a key stage of negotiations in regard to a TPP trade deal ahead of PM Abe’s visit to Washington to see President Obama on 28th April. PM Abe will then have the honour of addressing a joint session of Congress on 29th April. It is hard to envision this taking place under a cloud of failure on reaching a deal on TPP.”
“Has a deal been done and is a shift in rhetoric on the yen in Tokyo one of the quid pro-quos in reaching a deal on TPP? Then Hamada-san’s comments make a lot of sense.”
“…we don’t doubt for one moment the fact that Japan would only agree to something that they feel was ultimately in its own interest. And Tokyo may well feel now is the correct time from the domestic standpoint on the yen to change tack.”