Three reasons to expect more downward pressure on the Japanese yen – Barclays

Economists at Barclays maintain a bearish bias on the Japanese yen over next year due to three reasons.

Domestic overseas monetary policy divergence

“The Bank of Japan (BoJ) lags monetary policy normalisation amid relatively contained domestic inflation despite global stickingflation driving hiking cycles elsewhere, resulting in widening yield differentials.”

Reduced safe-haven demand

“As COVID-induced safe-haven dominance of the USD fades in favour of JPY’s safe-haven revival, the yen should face headwinds so long as a positive global risk backdrop remains.”

Negative FX supply-demand

“The yen’s negative FX supply-demand continues to weigh on the currency with the ongoing capital outflows via external portfolio and direct investment and negative terms-of-trade impact of heightened oil prices.”