“In recent days, the yen has returned to its lowest level against the dollar for 20 years. This is largely explained by the divergence in monetary policy between the Bank of Japan and the other major central banks”, observes CPR AM. The asset manager thinks that the divergence of views publicly displayed between the BoJ and the government is surprising, in a country where these two players work hand in hand more than anywhere else in the developed world.
The room for maneuver of the Japanese authorities therefore appears, according to him, to be very limited.
CPR AM stresses that the decline of the yen could however make the Chinese authorities react since the yuan/yen parity is back on the highest levels observed since 1994. “China is probably uncomfortable with the weakness of the other major regional currency” explains the asset manager.
From an investor’s point of view, the yen would have a considerable margin of appreciation in a scenario where inflationary pressures ease and the monetary policy tightening of the other major central banks of the world stops.