Wednesday, September 9, 2015

JPY: Yen loses ground as risk on sentiment makes a comeback - MUFG

FXStreet (Delhi) – Derek Halpenny, European Head of GMR at MUFG, notes that the Japanese currency is losing ground against its peers as risk appetite is making a comeback. For the Japanese yen, we would not be surprised to see a period of under-performance as market participants start to speculate on the prospect of additional action from the BOJ, he further adds.

Key Quotes

“The stand-out performance as we look at our screens first thing this morning is the surge in the Japanese equity markets – the Topix Index closed some 6.4% higher as fears over China economic growth continue to ease.”

“Economy Minister Amari has indicated that the government is considering an extra fiscal stimulus of JPY 2trn in the wake of the China turmoil that has raised concerns in Tokyo over the potential impact. The stimulus package would be financed by higher than expected tax revenues of JPY 4trn.”

“PM Abe today also reiterated his determination to implement corporate tax cuts and promised to take a step next year by cutting the rate by 3.3ppt from the current rate of 35%. Finally, there is also speculation emanating from China of further fiscal stimulus support there also.”

“While the extra fiscal stimulus in Japan is a positive there must also be a degree of scepticism over the potential impact on the real economy. A JPY 2trn package would be less than the JPY 3.5trn package last year and the JPY 5.5trn package the previous year.”
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