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Strong Yen against Hamstrung Yoshihide Suga

    • 2108 posts
    January 29, 2021 4:27 AM EST
    Japan's Liberal Democratic Party (LDP) will elect a new leader to
    succeed the resigned Shinzo Abe as the next Prime Minister on September
    14. This election, therefore, will be determined by the LDP factions
    rather than the country's public opinion. While Chief Cabinet Secretary
    Yoshihide Suga has taken a lead in the LDP's leadership race, he
    stressed to carry “Abenomics” forward with no novelty in his political
    platform.To get more news about WikiFX, you can visit wikifx official website.

      In fact, the mess in the country's economy cannot be cleared up
    whatever Suga's politics are. Not only is Japan's economy the worst
    among the major industrial nations, but the government's debt-to-GDP
    ratio is the world's largest, which is even more than Greece and Italy
    that are known to be in debt crisis.

      Consequently, I hold a gloomy view that the Japanese equities may be
    too high to keep the upside as Suga is not capable to guide the country
    out of its slump. The Nikkei 225 index has regained 7,142 points
    (43.60%) to 23,500 from a March low of 16,358 and is approaching to the
    triple top that was formed earlier, with the largest resistance lying in
    the 24,448.5 of September 2018, which is also the high level of October
    1991. This index is expected to retreat after seeing little chance of
    breaking through the triple top.

      A decline in Japanese stocks will trigger the unwinding of carry trade
    in the currency, driving a rise in risk aversion and strengthening the
    yen. At this stage, the weak U.S. dollar leaves limited space for the
    yen to drop sharply, with the biggest upper resistance against the yen
    between 107.04 and 108.16. On the contrary, if the Nikkei does fail to
    hit the top and fall steeply in the future, USD/JPY will have a chance
    to challenge the 104.19 low of July 31, where a breach below will see
    the yen showing its power. In addition to the election of the LDP's
    leader, investors should also pay attention to the central bank's
    interest rate meeting on September 17, noticing whether the monetary
    policy will change after the new Prime Minister takes office.