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Mix-Ansicht- Warum der Yen steigen wird! - nasdaq, 06.07.2003, 17:12
Warum der Yen steigen wird!
-->Hier ein Ausschnitt, der die Lage recht gut aufzeigt. Allerdings wird davon ausgegangen, dass es im Zuge einer breiten wirtschaftlichen Erholung in den USA und Japan zu einer Verschiebung der Wechselkursverhältnisser kommt. Diese Ansicht teile ich nicht stimme aber mit den Argumenten überein und glaube, dass die Bewegung im EUR/JPY von ca. 140 auf 136 erst der Anfang einer größeren Korrektur bis in den Bereich von 120 bis in den nächsten 6-9 Monaten darstellt.
USD/JPY and EUR/JPY to Head Lower
JPY assets have been undervalued, under-loved, and under-owned. If the US economy does start to recover, there will be consequences for JPY asset prices. I continue to believe that the risks to USD/JPY and EUR/JPY remain to the downside. The JPY remains the only G-3 currency that, in our view, is undervalued on an index basis. In addition, with the sharp rally in the Nikkei and with global investors still underweight JPY assets, especially the Nikkei, the scope for the JPY to rally against both the USD and the EUR is still there, in my view. A genuine recovery in the US will only accentuate this trend. USD/JPY at ¥115 may still be a firm line in the sand for the MoF for some time, but EUR/JPY can easily penetrate below ¥130, if the conditions are right.
Why I Continue to See Upside Risk to the JPY
Arguably, three of the most-hated assets in the world in recent years have been the JPY, JGBs, and the Nikkei. At least this seems to be the popular view in the market -- a view I have fought hard against for longer than I’d like to admit. Strong JGBs and a weak Nikkei are generally signs of economic weakness, but a strong JPY can also be a sign of weakness, if it is a result of deflation expectations. However, weak JGBs, a strong Nikkei, and a strong JPY are a sign of strength for Japan. For most of 2001-02, we were in the former scenario. But I believe we are transitioning to the latter scenario. Habitually forecasting USD/JPY to be 15 yen higher than the spot rate is quickly going out of fashion. And being perennially bearish on anything Japanese will now be hazardous to your investment portfolio, I believe. My reasons for believing that the JPY will start to appreciate are as follows:
* Reason 1. Japan (JPY) is undervalued. The USD index is still overvalued, and the EUR is now in overvalued territory. Currently, the JPY is the only G-3 currency that is still very undervalued on an index basis. Our calculations show that the median fair value for USD/JPY is around ¥107, more than 10% below the current spot price, and that for EUR/JPY is ¥117, about 17% below the current spot price. (Keep in mind that these are the median values of 12 specifications that we estimated.) An artificially high USD/JPY is one of the key reasons why USD/Asia has failed to correct. Since Asia accounts for a little more than half of the US’s overall trade deficit,the inability of USD/Asia to correct is one of the key reasons why the US will have difficulties compressing its C/A deficit. In turn, downward pressures on USD/JPY and USD/Asia will persist because of the large C/A deficit the US runs with Asia.
* Reason 2. Japan (the economy) is under-loved. The market is underestimating the strength of the economy in Japan. I am not saying that Japan is about to embark on a robust recovery any time soon. However, for several months now, Japan has consistently outperformed general expectations. It is still a very weak economy, but the pace of the atrophy appears to be decelerating, not unlike the phase of the business cycle that the US is in. The recovery in the US is tech-led, reminiscent to the situation in 1998-99. Recall that most of the ‘techy’ currencies, including the JPY, performed well. There is no reason why this cannot occur again now.
The fact that JGBs are selling off is not a cause for concern, as long as it is occurring in an environment of buoyant equities. The talk of the bursting of the JGB bubble is unfounded, in my view. Bonds are selling off all over the world; it is not a Japan-specific phenomenon. Also, with the economy still not growing, it is difficult to see the 10-year bond yield rising too far above 1.0%. Hmmmm hier hat er sicherlich bei Langfristiger Sichtweise Unrecht, aber das macht vorerst nichts!
For the impact of the backup in bond yield on banks, the basic trade-off ratio is 60:10, i.e., every 60-bp backup in the 10-year yield has the same effect on the balance sheets of banks as a 10% sell-off in equities. In the past three months, the 10-year yield has risen by around 40 bps, but equities have risen by close to 20%. It is clear that banks are better off with this trend. Moreover, a higher Japanese yield compresses the size of the carry on AUD/JPY, EUR/JPY, and GBP/JPY positions, which should actually be positive for the JPY and negative for these JPY-crosses.
* Reason 3. Japan (Nikkei) is under-owned. It is likely that the world is still meaningfully underweight the Nikkei. As global equities continue to head higher, foreigners will need to buy Japanese equities (and the JPY) just to keep this underweight position from rising. If the Nikkei outperforms because of the fact that this prospective recovery in the US is likely to be tech-led, and because Japan is a ‘high-beta’ economy that should benefit disproportionately from a recovery in the US, more capital could be drawn into Japan. This may or may not happen. But in a world where investors have fully shifted from ‘fear’ to ‘greed,’ it seems that a mini-repeat of 1999 (a Nikkei-led rally in the JPY), in terms of USD/JPY, is a more likely risk than a mini-repeat of 1997-98. In addition to a cyclical recovery in the US and Japan, and a generally buoyant global equity environment, progress on structural reform could be another positive for the Nikkei and the JPY. Banking and corporate reforms, though progressing gradually, and though the benefits of these reforms will only be obvious over the medium run, they could nevertheless give foreign investors another excuse to buy the Nikkei.
* Reason 4. EUR/USD may have peaked for the year. As I argued last week in We May Have Already Seen the Year’s Peak in EUR/USD, June 26, 2003, Euroland has involuntarily joined the war of competitive devaluation because the parlous state its economy is in will not allow it to absorb the overshoot in EUR/USD, in my view. I believe it will be very difficult for EUR/USD to break above $1.20 again, and that EUR/USD will no longer be the ‘path of least resistance’ in the structural USD index correction. In fact, I believe that the structural ascent in EUR/USD is mostly over. This means that the residual downward pressures on the USD index will come through against a broader set of currencies, including the JPY, commodity currencies, LatAm currencies, and eventually the AXJ currencies.
EUR/JPY More Exposed than USD/JPY
There are three main reasons why I believe EUR/JPY is exposed to more downside risks than USD/JPY. The first is the MoF’s intervention policy. The MoF’s resolve to defend ¥115 is clear. The MoF does not have a target on EUR/JPY, in my view. Second, with EUR/JPY being more overvalued than USD/JPY, and with the Euroland economy underperforming both the US (this year, in GDP growth terms, likely by a factor of 5:1) and Japan (by a factor of 2:1), EUR/JPY could be more exposed to downside risks than USD/JPY. ¥130 can be penetrated, in my view. Other JPY crosses could also experience some downward pressure if the US does start to show signs of a strong recovery in the coming months. Third, related to the point I mentioned above on how higher JGB yields could help support the JPY, we should distinguish who owns what. In recent months, the private investors in Japan have been buying non-USD bonds, while the public sector, through currency intervention, has been a key buyer of USD bonds. In the event that there is off-loading of foreign bond holdings and repatriation back into Japan, the JPY-crosses are in greater jeopardy than USD/JPY because of this disparity in the composition of the bonds holdings by the private and public sectors.
Another Lesson on Monetary Economics
One of the reasons why the Nikkei is so well supported is the quietly aggressive stance of the BoJ under the leadership of Mr. Fukui. The current account target of the BoJ has been raised by ¥8 trillion so far this year. This monetary stimulus has taken place to complement structural reforms, rather than to substitute for reforms as was the case in the past. The end result is a buoyant Nikkei when the global conditions improve. An important lesson here, in my view, is that the simplistic and popular view that ‘money printing = a weak JPY’ is just wrong; it has always been wrong. blablablabla
Bottom Line
The JPY is undervalued; the Japanese economy is under-loved, and the Nikkei is under-owned. If the US economy does experience a tech-led recovery, a mini-repeat of what happened in 1999 (a Nikkei-led rally in the JPY) is a likely scenario. In that case, the MoF is likely to be quite busy this summer. I expect USD/JPY and EUR/JPY to drift lower for the remainder of the year.
Stephen L. Jen (MSDW)
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