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Asian Investor features Mikio Kumada’s views on yen weakness amid BOJ policy normalization
As speculation around further Bank of Japan policy tightening continues, investors are reassessing the outlook for the Japanese yen and the risks associated with crowded currency positioning. Asian Investor recently published an article featuring comments by Mikio Kumada, Global Strategist at LGT Capital Partners, who explains why the risk-reward profile for short yen positions has become increasingly asymmetric.
While interest rate differentials continue to support short yen positions, Mikio argues that the currency's deep undervaluation and Japan's transition out of deflation are shifting the longer-term outlook. He observes that further policy normalization by the Bank of Japan is likely to narrow the interest rate gap over time, while crowded positioning and currency interventions by Japanese authorities increase the risk of sharp reversals.
Looking ahead, Mikio believes the balance of risks is increasingly tilted towards yen appreciation. In addition to monetary policy normalization, he points to broader shifts in Japan's policy framework, including greater reliance on fiscal and industrial policies to support growth and investment, as factors that could strengthen the currency over the longer term.
Read the full article (behind paywall) here.
