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Prime Minister Shinzo Abe’s inflation drive may get a boost as Nomura Holdings Inc. forecasts as much as $200 billion in foreign asset purchases by Japan’s pension funds will weaken the yen.
Nomura predicts a selloff of local bonds by the $1.3 trillion Government Pension Investment Fund will depreciate the nation’s currency by about 10 yen against the dollar over the next 12-18 months, while Mitsubishi UFJ Morgan Stanley Securities Co. estimates an 8 yen slide. GPIF and other public pension funds will shift an additional 12.4 trillion yen ($122 billion) into foreign bonds and 7.5 trillion yen into overseas stocks, according to Nomura’s “upside scenario.”
The yen’s 18 percent drop last year helped push inflation to a five-year high in December by increasing the cost of fuel imports. Price growth has since stalled as the yen rebounded and the Bank of Japan refrained from expanding its unprecedented easing. GPIF’s reshuffling may come as early as this month, when Abe delivers a growth strategy update to parliament.
“If the GPIF bombshell drops at the right time, dollar-yen could top 110 within this year,” Daisaku Ueno, the Tokyo-based chief currency strategist at Mitsubishi UFJ Morgan Stanley, said in a May 29 phone interview. “With Prime Minister Abe pushing hard for change, and the market expecting something, it’s difficult for GPIF to reply with nothing in June.”
Mitsubishi UFJ Morgan Stanley’s official forecast is for the yen to end the year at 108.5 per dollar, with any effect from GPIF revisions being additional to that. Nomura predicts it will weaken to 112, including an initial 3-4 yen from GPIF reallocations. The median estimate of 79 strategists polled by Bloomberg News is for 108 yen per dollar at year-end, from 101.95 yen as of 9:55 a.m. in Tokyo Monday.
Nomura recommends selling the Japanese currency against a basket of currencies including the U.S. dollar, British pound, Norwegian krona, Mexican peso, and Polish zloty, predicting a return of about 5 percent over three months, according to the bank’s London-based foreign-exchange strategist Yujiro Goto.
“Expectations for a GPIF announcement by the end of this year are quite high, but not for June,” Goto said in a May 30 phone interview. “We expect a positive surprise from a June announcement that can send dollar-yen higher,” including an initial gain as high as 105, he said. (Bloomberg)
Nomura predicts a selloff of local bonds by the $1.3 trillion Government Pension Investment Fund will depreciate the nation’s currency by about 10 yen against the dollar over the next 12-18 months, while Mitsubishi UFJ Morgan Stanley Securities Co. estimates an 8 yen slide. GPIF and other public pension funds will shift an additional 12.4 trillion yen ($122 billion) into foreign bonds and 7.5 trillion yen into overseas stocks, according to Nomura’s “upside scenario.”
The yen’s 18 percent drop last year helped push inflation to a five-year high in December by increasing the cost of fuel imports. Price growth has since stalled as the yen rebounded and the Bank of Japan refrained from expanding its unprecedented easing. GPIF’s reshuffling may come as early as this month, when Abe delivers a growth strategy update to parliament.
“If the GPIF bombshell drops at the right time, dollar-yen could top 110 within this year,” Daisaku Ueno, the Tokyo-based chief currency strategist at Mitsubishi UFJ Morgan Stanley, said in a May 29 phone interview. “With Prime Minister Abe pushing hard for change, and the market expecting something, it’s difficult for GPIF to reply with nothing in June.”
Mitsubishi UFJ Morgan Stanley’s official forecast is for the yen to end the year at 108.5 per dollar, with any effect from GPIF revisions being additional to that. Nomura predicts it will weaken to 112, including an initial 3-4 yen from GPIF reallocations. The median estimate of 79 strategists polled by Bloomberg News is for 108 yen per dollar at year-end, from 101.95 yen as of 9:55 a.m. in Tokyo Monday.
Nomura recommends selling the Japanese currency against a basket of currencies including the U.S. dollar, British pound, Norwegian krona, Mexican peso, and Polish zloty, predicting a return of about 5 percent over three months, according to the bank’s London-based foreign-exchange strategist Yujiro Goto.
“Expectations for a GPIF announcement by the end of this year are quite high, but not for June,” Goto said in a May 30 phone interview. “We expect a positive surprise from a June announcement that can send dollar-yen higher,” including an initial gain as high as 105, he said. (Bloomberg)
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Articles by Korea Herald
