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Forex Flash: USD/JPY ascension not yet over – UBS

By FXstreet.com,  January 04, 2013, 04:53:00 AM EDT

FXstreet.com (Barcelona) - The persistent strength of the yen during Japan's two 'lost decades' paradoxically reflects a lack of confidence in Tokyo's ability to revive the economy. Japan's new government wants to break the cycle of weak growth, falling prices and a strong currency. The yen is already down 10% as a result. However, "the steady erosion of policymakers' credibility over the last twenty years suggests officials may require increasingly aggressive policies now to keep the yen weaker." writes Mansoor Mohi-uddin, Managing Director at UBS.

Moreover, "We believe the rally in the USD/JPY from 78 to almost 88 has more room to run. " he adds. Even before conservative Governor Shirakawa's term ends in April, the Bank of Japan is likely to choose a higher inflation target and greater quantitative easing. But ultimately more radical moves - including foreign bond buying or even formal yen targets - may be needed to overcome policymakers' limited credibility and curb the currency longer term.




The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.


This article appears in: Investing, Forex and Currencies

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