< The 2014 All-Japan Research Team
For a second consecutive year, Yunosuke Ikeda of Nomura captures the No. 2 spot, earning praise for providing “both tactical insight and longer-term strategic views,” as one loyalist puts it. The yen will weaken further in the long term, Ikeda contends, in part because the interest rate differential between the U.S. and Japan has “no further room to shrink,” he says, “but has plenty to broaden going forward.” In particular, if America’s economy returns to a 3 percent growth trajectory starting in the second quarter, after overcoming the impact of weather, then the market will begin pricing in a U.S. Federal Reserve rate hike scenario for 2015, which would likely strengthen its currency, the strategist explains. What’s more, Ikeda notes, Japan’s ballooning trade deficit and elevated level of outward foreign direct investment will drive the Nomura Yen Flow Index — a model designed to help predict long-term conditions for the currency — to a supply-demand “deficit” of approximately ¥15 trillion ($146 billion), on an annualized basis, through this year and next, which is “significant enough to weaken the yen by around ¥9 per year even without a strong tailwind from U.S. interest rates.” His 2014 year-end target for the yen is 114 to the dollar, a 10.1 percent depreciation of the Japanese currency from its mid-March value. |