Deflation is very entrenched in Japan and even over the longer term the scope for changes in monetary policy is very limited. The yen is likely to head lower. |
Deflation is very entrenched in Japan. |
Given the prospect that the Japanese economy will remain on a path of expansion, we believe that Japanese investors will continue to take advantage of higher yields abroad, particularly in the United States. |
Interest-rate differentials between the U.S. and the euro zone will remain at least as wide as at present, fueling purchases of U.S. securities by foreign investors, both public and private. |
The speculation was reinforced by the report (Wednesday) that consumer prices in the US fell by 0.1 percent on a seasonally adjusted basis in December. |
We doubt that economic activity in the euro zone will afford the ECB scope to raise the refinancing rate beyond 2.50 percent. |
We have a good opportunity for the dollar to do better than it seems for some time. The pickup in yield is quite wide. |