Politics intervenes again – Rabobank

While hopes were building that some of USD/JPY’s recent volatility was about to die down, the political shift in Japan demonstrated that the currency pair remains in a nervous mood, notes Jane Foley, currency strategist at Rabobank.

USD/JPY will reach 140 in 3 to 6 months

“Despite the changing political landscape in both Japan and the US, we would expect central bank policy to remain the main driver of USD/JPY in the coming months. US economic data will be watched for any sign that the US may repeat its 50 basis point rate cut before the end of the year, while Japanese figures will be assessed against expectations that the BoJ will raise interest rates again to the beginning of the year. “

“Ishiba’s assurance that the government will announce additional fiscal stimulus ‘if needed’ should be reassuring to JPY bulls.” Ishiba’s objective for the country to “fully exit deflation” also supports the JPY. Ishiba vowed on Friday to accelerate Kishida’s policies aimed at boosting household consumption through higher wage growth.”

“This sets the stage for a strong new round of wage talks next spring. We continue to target 140 USD/JPY on a 3-6 month view.”