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BoJ Attacks – RBS

FXStreet (Barcelona) - Greg Gibbs of RBS notes that BoJ’s fiscal consolidation drive for growth is leading to new lows for the JPY, and expects the falling trend to continue.

Key Quotes

“Abe’s pushing out of fiscal consolidation and drive for growth threatens to trigger a crisis of confidence in government debt. Perhaps this is the fundamental justification for selling the JPY to fresh lows. These risks for Japan are indeed rising as inflation approaches, but it’s hard to conclude that the market is building them into its assessment of JPY yet.”

“Trade data on Thursday will be interesting, showing some recent evidence of recovery, but it is hard to see this being enough to halt the USD/JPY advance. JPY is starting to look very cheap, so we are not sellers here, but do not want to step in from of the freight-train either.”

“While there appears limited wider fallout form a weaker JPY, its falling trend may persist. Recent Japanese economic data has been showing some signs of recovery, and the weak JPY may further boost the growth outlook and inflation expectations in coming months. But it may be some time before this helps stabilise the JPY.”

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