fundamental analysis that enough is
FX enough and led
The Japanese Upper House elections are scheduled for
July 2013 and many as quickly as feel
that Abe is looking to push through as much legislation,
possible
Te Japanese economy has long suffered since the bursting of the asset price bubble in the late 80s and early 90s, leading to the ‘lost decade’ where incessant deflation lead to economists coining the phrase ‘Japanification’ to describe such troubled circumstances. Tis period of extended economic stagnation has been compounded by the emergence of China as a leading exporter alongside regional peers like South Korea. Further, Yen is considered to be a safe haven currency alongside USD and is primarily driven by risk sentiment. So naturally, when the US Sub- prime crisis exploded in 2007-08, followed shortly aſterwards by the
start of the European Debt crisis, Yen strengthened to record levels against the Dollar and the Euro. Any economy that is predominantly geared towards exports requires a carefully managed currency. As such, the unprecedented levels of strengthening made Japanese goods increasingly less competitive. Additionally, the earthquake and Tsunami which shook Japan in 2011 not only caused severe infrastructural damage but lead to a pivot away from cost efficient nuclear energy, which in turn placed further strain on the economy.
Troughout his election campaign, Shinzo Abe’s tone has implied
commentators to herald the birth of ‘Abenomics’ (name given to a suite of measures introduced by Japanese prime minister to revive the sluggish economy). He has layered political blame and pressure on the Bank of Japan for their lack of aggression in preventing an excessively strong currency. He has strong-armed them into adopting a 2% inflation target and wants the bank to dramatically step up its asset purchase programme. Finance Minister, and also former PM Aso recommended a target price for USD/JPY of 90, a level that aſter a period of rapid appreciation from the 70’s has been met. Te final aspect of ‘Abenomics’, according to Marc Chandler, Global Head of Currency Research at Brown Brothers Harriman, is the stoking of nationalism and the reassertion of Japan as an international power.
Abe’s sweep of the Japanese political
scene has been characterised just as much by its aggression as its speed. Te ‘enough is enough’ mantra of his campaign can be one explanation for his stance, but gradually analysts and observers are starting to suspect that something else may be afoot. Abe’s previous post as PM was short lived before he was somewhat abruptly forced to resign due to a combination of terrible approval ratings, embarrassing losses in the Upper House and worsening health. Markedly, the Japanese Upper House elections are scheduled for July 2013 and many feel that Abe, scarred from his previous experience, is looking to
FX TRADER MAGAZINE April - June 2013 15
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