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Investors Target 105 For Yen - Analyst

posted 10 May 2013, 08:39 by Mpelembe   [ updated 10 May 2013, 08:40 ]

The continuing weakening of the yen is down to strength in the U.S. and sterilisation in Europe, says Mizuho International's Seijiro Takeshita.


"(QUESTION: It took quite a while before the Yen broke back through 100 against the Dollar. Where next, in your opinion?)

 Well I think most people are now targeting 105, which is still in the sphere of purchase price parity. But when it does break that level, it is now going to have a negative effect as well. For example right now, we have a massive amount of imports of LNG and crude oil because of the aftermath of the Fukushima crisis. So there will be some negativities, as we said, but for the time being, there still is a strength on the overseas side, very much had to do with strength in the United States that's coming as we saw last night and also sterilization in Europe as well. Those are the two major external factors that are contributing to continuous weakening of the Yen. 

(QUESTION: Seijiro, some analysts looking for a level, for example, as an indication where the Japanese exporters will start to sell the Dollar. I mean do you have any inclination where that level might be?

) Well at this point, we're not seeing any signs of that. The reason for it being is that they're trying to re-cluster their positioning. I mean their only, only strength to reap the benefit of a weakening there or I'll just say more like a correction of excessive strength of the Yen and basically, not only benefiting from the operating levels but from here onwards, they will be trying to claw some of the market share back through the pricing strategy which they've lost immensely to the Germans and also to the Koreans on the high end and on the low end respectively. And for that reason at this point, their ethics policy still remains very conservative, targeting many of them at JPY90 to USD1 or JPY95 to USD1 as we see their earnings right now. 

(QUESTION: in the wider side things, the Nikkei continues to jump. Does that continue as a result as well?)

 Well our strategy is still very bullish. It's targeting now well over JPY15,000. Yes, the P/E is getting a little bit rich, about 17x times on average versus 14x in Dow. But what we got is further benefits from the Yen kicking in on Japanese exporters which would obviously simmer down the P/E levels. But moreover, we've got election coming up in July, July 21, the Upper House election. We will be hearing quite a lot of more fiscal policies and possibly frontloading many of the deregulatory terms as well which basically would provide further positive themes to the stock market. 

(QUESTION: And do you think their competitors like Germany, for example, will be complaining about this or are the Japanese basically getting their own back here?)

 Well basically, I agree with the opinion that the fact of the matter is only it's very recent that the Japanese have started to learn about verbal intervention. And compared to what they've been doing, the Japanese authorities still have only just begun. So the fact of the matter is that I think they will not consider that as a pressure and most importantly, unless they get pressure from the United States, I doubt the Japanese authorities would really take into account to alter their strategy in any sense or form."