Yesterday afternoon we held a flash conference call to discuss our revised outlook for Japan and the associated investment implications. Key topics included:
- Where we stand vs. consensus on Abenomics: we think a re-test of ~147 on the USD/JPY cross is a probable occurrence over the intermediate term and we think that equates to roughly 50% upside in the Nikkei 225 from today’s closing price
- Our intermediate-term outlook for Japanese monetary and fiscal policy: commensurate with this forecast, we think the BoJ will consistently surprise investors with the frequency and scope of further QQE expansion; fiscal policy is extremely supportive over the NTM
- The elevated risk of a global deflationary spiral: in line with our extremely bearish bias on the Japanese yen, we believe #StrongDollar commodity deflation is set to continue weighing on reported inflation readings globally, underpinning expectations for looser G3 monetary policy, at the margins
Consistent with these views, we are once again officially bearish on the Japanese yen (FXY) and bullish on large-cap Japanese equities (DXJ).
CLICK HERE to access the replay podcast for today’s call.
CLICK HERE to access the associated presentation (~20 slides).
As always, please feel free to reach out with any follow-up questions.
Have a great evening,
Associate: Macro Team