Japanese Prime Minister Yoshihide Suga’s administration is only weeks old, but it is already clear the new administration will continue Abenomics and push for the structural reforms that were never enacted. The Tokyo markets underwent structural changes during the nearly eight years of Abenomics, and overseas investors have been making more JPY cross-currency arbitrage trades while Japanese companies and investors have been acquiring more overseas assets. What is in store for Tokyo markets under “Suganomics”? More locally, stock prices have dropped, and the JPY has strengthened recently as the coronavirus pandemic has flared up again in Europe. Speculation has been simmering in the market that Prime Minister Suga will dissolve the Lower House and hold a general election. What is in store for USDJPY, JPY rate, and USDJPY cross-currency basis?
In this episode, MUFG Chief Japan Strategist, Takahiro Sekido, tests market reaction to the Bank of Japan’s exchange traded funds purchases during Abenomics and takes a look at USDJPY, JPY rates, and JPY basis as “Suganomics” enjoys its honeymoon period.
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