JPMorgan Chase & Co. is making two contrarian calls: first that the yen will strengthen toward 100 per dollar and second that such a rally will not destroy the world's third-largest economy.
Tohru Sasaki, Tokyo-based head of Japan markets research, sees a gain to 110 next year from about 121 now, the most bullish among around 60 forecasts compiled by Bloomberg. While Sasaki sees the equilibrium exchange rate at "below 100," he doesn't see that as spelling the end for the recovery in corporate profits.
"What investors like to hear is that the yen is weak and stocks are up — but if everyone's constantly betting that way, at some point they're going to get burned," Sasaki, who worked at the Bank of Japan for more than a decade before joining JPMorgan in 2003, said in a Dec. 18 interview. "It's possible that equity prices keep going up forever, because everyone is working to maximize their returns. But in the forex market, it will never happen — there's an up and down."