Cooling U.S. inflation is proving to be a gamechanger for Nikko Asset Management’s Yasushi Ishikawa. He’s ditched his bearish view on the yen, and now has a ¥135 target against the dollar by year-end.
U.S. real yields are likely to fall quicker than those in Japan as prices there are "coming down with a higher degree of certainty,” said Ishikawa, Nikko Asset’s senior executive director of global multi asset. Before data last week showed U.S. inflation at the slowest in two years, he thought it was possible the yen would weaken as far as ¥150.
Kazuo Ueda, governor of the Bank of Japan — which holds a monetary policy meeting next week — will bide his time in changing policy because he still "needs some evidence” that inflation will stick, said Ishikawa. The prospect of higher prices taking hold in the world’s third-biggest economy also means the Tokyo-based fund manager is becoming more bullish on Japanese equities.
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