Back
19 Apr 2013
Forex Flash: G20 cleared gives yen renewed selling momentum - BTMU
FXstreet.com (Barcelona) - Derek Halpenny, European Head of Global Markets Research at the Bank of Tokyo Mitsubishi UFJ notes that the Yen is the biggest mover in the fx market today as the G20 meeting passed without any notable criticism of Japan.
In his view, Halpenny feels that criticism was always highly unlikely, but nonetheless, the confirmation from FinMin Aso, that no-one oppose the policies of Japan, recently helped fuel renewed yen selling. Furthermore, he adds that in a week when gold prices plunged sharply and equity markets wobbled, the week looks to be closing on a positive note with some Asian equity markets up sharply today.
Halpenny writes, “The Shanghai Composite is 2% higher with other markets performing well. So there is less concern now that the plunge in gold was a signal of increased market volatility ahead. Although there was no criticism from G20 members of Japan’s recent actions, IMF Managing Director Lagarde did also state that although the monetary easing steps were a positive step more needed to be done and called on Japan to bring down overall government debt and implement structural reform.”
So, he continues, stating that the acceptance of yen weakness by the international community could probably turn if there was little evidence going forward that Japan was tackling key economic problems. In that regard, he sees that the presentation by the government of its economic reform program will also be key for the ongoing support that was clearly on display at the G20 gathering. He notes high levels of savings in the corporate sector is one such area that needs to be tackled through changes in the corporate tax structure that encourages a shift in these savings to the household sector through higher wages and dividends. Then, we may see evidence of better final demand conditions fuelled by personal consumption growth that would help lift inflation.
He finishes by commenting that expanding Japan’s potential growth rate through labour market reform and the easing of strict immigration laws are all aspects that need to addressed. FM Aso didn’t mention these points specifically in his article in the FT today, so investors will have to wait and see how credible the government plan is when released, probably in June.
In his view, Halpenny feels that criticism was always highly unlikely, but nonetheless, the confirmation from FinMin Aso, that no-one oppose the policies of Japan, recently helped fuel renewed yen selling. Furthermore, he adds that in a week when gold prices plunged sharply and equity markets wobbled, the week looks to be closing on a positive note with some Asian equity markets up sharply today.
Halpenny writes, “The Shanghai Composite is 2% higher with other markets performing well. So there is less concern now that the plunge in gold was a signal of increased market volatility ahead. Although there was no criticism from G20 members of Japan’s recent actions, IMF Managing Director Lagarde did also state that although the monetary easing steps were a positive step more needed to be done and called on Japan to bring down overall government debt and implement structural reform.”
So, he continues, stating that the acceptance of yen weakness by the international community could probably turn if there was little evidence going forward that Japan was tackling key economic problems. In that regard, he sees that the presentation by the government of its economic reform program will also be key for the ongoing support that was clearly on display at the G20 gathering. He notes high levels of savings in the corporate sector is one such area that needs to be tackled through changes in the corporate tax structure that encourages a shift in these savings to the household sector through higher wages and dividends. Then, we may see evidence of better final demand conditions fuelled by personal consumption growth that would help lift inflation.
He finishes by commenting that expanding Japan’s potential growth rate through labour market reform and the easing of strict immigration laws are all aspects that need to addressed. FM Aso didn’t mention these points specifically in his article in the FT today, so investors will have to wait and see how credible the government plan is when released, probably in June.