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EUR/JPY: target at 145 in 12M - Danske Bank

With the re-election of Prime Minister Shinzo Abe, analysts from Danske Bank, expect a continuation of Abenomics and the current monetary policy stimulus. They target EUR/JPY at 132 in 1M, 132 in 3M, 138 in 6M and 145 in 12M.

Key Quotes: 

“Growth momentum in Japan has been strong recently and the economy has now expanded for seven consecutive quarters – the longest economic upturn since the beginning of the 2000s. Growth is being driven primarily by the global economic recovery, which on the back of the relatively weak yen is pushing exports to their strongest streak since the big rebound in the global economy in 2010. As fiscal stimulus wanes next year, we are likely to see growth rates falling again.”

“Our main scenario expects the Bank of Japan to keep its policy unchanged, keeping the short-term policy interest rate at -0.1% and the 10Y Japanese government bond (JGB) yield at 0% over our 12M forecast horizon, assuming Bank of Japan governor Haruhiko Kuroda is reappointed when his term ends in April.”

“After Prime Minister Shinzō Abe’s Liberal Democrats regained the majority of seats (284 out of 465) in the Japanese election for the lower house on 22 October, he has a renewed mandate for his economic policy and further easing measures by the Bank of Japan could come into play. However, as long as the economy is running above trend growth on the back of the global economic recovery, we believe the Bank of Japan will stay put and keep its powder dry.”


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