Chang Wei Liang of DBS Group Research notes that the Japanese yen is the most undervalued G10 currency according to DBS Equilibrium Exchange Rate (DEER) metrics. Political developments following the LDP’s landslide victory and clarifications of fiscal plans have eased some concerns, while official comments on market monitoring may limit speculation, creating conditions for a yen recovery from deep undervaluation.
The political change is supported by the undervalued yen
“JPY (Japanese yen) continues to be the most undervalued of the G10 currencies.”
“Following the LDP’s landslide victory in February’s lower house elections, fiscal concerns eased somewhat as the Takaichi government clarified that the promised two-year suspension of the consumption tax on food would not be based on additional bond issuance.”
“Moreover, government officials, including Finance Minister Katayama, also said they are paying attention to markets after the election, which should curb excessive speculation on the Japanese yen.”
“Speculative JPY shortfalls could deepen further if fiscal concerns prove to be exaggerated, allowing the JPY to rebound from deep undervaluation.”
(This article was created with the lend a hand of an artificial intelligence tool and has been reviewed by an editor.)
