USD/JPY Maintains its Forecast at 130 in 12 Months – Goldman Sachs
Livesquawk reporting comments from Goldman Sachs on Japan’s plans on further policy measures and also on the yen outlook:
Japan may show more credible commitment to inflate economy by taking permanent fiscal expansion steps together with expansion and/or extension of duration of JGB purchases by the Bank of Japan
This could be a pretty strong policy mix that may help to boost inflation expectations; a more open coordination of fiscal and monetary authority would make it explicit that policy makers are willing to monetize part of debt and any fiscal expansion announced by government
It’s striking that markets aren't pricing this scenario at all
A larger deficit-to-GDP ratio could be more openly funded by a further expansion of QQE program via purchases of long-dated JGBs: negative bond yields across maturity structure also make fiscal expansion much less costly
Expect USD/JPY to move higher again in near term and maintains its forecast at 130 in 12 months.