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Japanese Yen Expects a Strong Start in 2016

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Dec. 29 2015, Updated 1:49 p.m. ET

Japanese yen shows signs of strength

The ultra-easing policy stance adopted by the BoJ (Bank of Japan) has always ensured that the yen’s outlook remains negative. It’s expected to be different in 2016 especially in terms of the Japanese yen’s forecasts. The BoJ made it clear that a strong yen isn’t something that it wants. The expectations of a strong yen are mainly due to the economy. It has been strengthening over the past 12 months. The BoJ undertook a recent monetary policy measure. Against the market’s expectation, the asset purchase program wasn’t increased.

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BoJ’s monetary policy and other data

The BoJ’s recent monetary policy meeting on December 18, 2015, failed to live up to the market expectations. The BoJ resisted any increase in the asset purchase. The change in the BoJ’s swing members was pretty clear. Three out of the nine members were against even the slightest technical easing. The main negative to the yen attaining strength will be the political will that’s against strengthening the currency. The national core CPI (consumer price index) was positive in December. It was positive for the first time since July. More weakening from the emerging market will increase the demand for the yen. It’s still a major safe-haven currency.

Impact on the market

The currency-based Guggenheim CurrencyShares Japanese Yen ETF (FXY) ended lower by 0.24% at the end of the year from January 2, 2015, to December 28, 2015. In contrast, the iShares MSCI Japan Index (EWJ) rose by 7.7%.

Japanese ADRs (American depositary receipts) on US exchanges were trading on a mixed note. Leisure goods maker Sony (SNE) rose by 20.0%. In the banking arena, Mitsubishi UFJ Financial (MTU) fell by 14.0%, while Sumitomo Mitsui Financial (SMFG) rose by 0.42%.

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