USDJPY Back to 100 Says Former BoJ Exec.; JP Morgan Thinks Otherwise

by on December 9, 2013 3:15 am GMT

The USDJPY trades through 103, but not for long, according to a former Bank of Japan (BoJ) executive Tohru Sasaki. According to Sasaki, the yen will rally through the first half of 2014 because the BoJ will not have the ability to shock and awe the markets with monetary easing like they have this year.

Japanese Primer Minister Shinzo Abe and BoJ Governor Haruhiko Kuroda have vowed to end decades of deflation through bond buying of monster proportions – roughly three-times the equivalent of the monetary easing in the United States.

The initial size of the BoJ’s monetary easing shocked the markets, and it did eventually allowed the Japanese economy to pick up steam. The problem is that the effects of Abeconomics and the BoJ is that the growth is waning and the market is left wanting more. In an interview, Sasaki said “next time the BOJ can’t beat market expectations.”

However, JP Morgan believes that the BoJ will double the purchases of exchange-traded funds to ¥2 trillion a year and increase monthly debt purchases to ¥10 trillion from ¥7 trillion. Sasaki believe the yen will reach 104 per dollar (technicals show 105 is possible), but the yen will be bought back, he said.

The USDJPY is currently trading at 102.96 as both the dollar and yen are seeing no love from traders. Expect a pullback from its recent 100+ pip gain on Friday.