Our Global Investment Strategy service published a report entitled “Escape From The Land Of The Rising Yen”, which discusses the following points:
- Hopes that Abenomics would lift Japan out of its deflationary quagmire are being crushed by the weight of a stronger currency.
- The BoJ’s experiment with negative interest rate policy has failed. While direct currency intervention remains an option, it is one that is unlikely to be exercised until after Japan hosts the G7 Summit in May.
- There is a high probability that the planned April 2017 sales tax hike will be postponed, perhaps indefinitely.
- Combining a major stimulus package with “helicopter drops” of money and an increase in the inflation target to 4% may be the only way to permanently overcome deflation. Policymakers are not at the point where they are ready to do this, but they are getting there.
- The yen is likely to strengthen some more in the near term. However, the long-term path for the currency is to the downside. This makes Japanese stocks a long-term buy as well.
To access the report entitled “Escape From The Land Of The Rising Yen”, please click here.