Yen seen appreciating, go short USD/JPY soon – Morgan Stanley

Analysts at Morgan Stanley offer their near-term view on the USD/JPY pair, as they believe the recent weakness in the Yen is about to end.

Key Quotes:

“The magnitude of the USDJPY advance witnessed over recent weeks has surprised us. 

Japan's pension funds buffered pay out pressure via their high cash reserves, and think once the reserves are exhausted these pension funds will reduce assets funding pension obligations.

Total samurai issuance for Japan's current fiscal year (due to end March 31) reached JPY2.427 trn (USD22bln) ... slowing global economy will reduce this JPY weakening flow.

We ... see that the lack of policy tools in the next downturn may be a G10, and not an exclusively European, issue. Markets may not have yet understood what the lack of monetary policy tools may mean for market liquidity conditions. 

We underline our risk bearish view and see the JPY appreciating from here. Our AUDJPY and USDJPY shorts should soon start to perform.”