Top forecaster sees yen tumbling to 30-year low in 2024

New York - The yen is

barrelling towards its weakest level in more than 30 years

as the Bank of Japan (BOJ) holds firmly to its stimulative monetary policy stance, according to the currency’s most accurate forecaster.

Mr Garth Appelt, head of foreign exchange at Mizuho Americas, expects the yen to slide to as weak as 155 against the US dollar in the first quarter of 2024 as Japanese policymakers insist on keeping their policy loose.

It will likely take a shift by peers at the US Federal Reserve and a weaker US dollar to finally stop the yen’s slump, he said.

“The biggest issue for the Japanese authorities is to find out when the Fed is done,” he said. “You have higher-than-expected US growth and you have a Fed that you don’t know whether is done hiking. All of those things are very unfortunate for the Bank of Japan.”

Yen forecasters at Mizuho were the top-scoring in Bloomberg’s third-quarter accuracy ranking, which scores currency prognosticators based on their margin of error, timing and directional accuracy.

The yen has dropped almost 12 per cent against the US dollar so far in 2023, underperforming all of its Group of 10 peers plus most emerging market currencies.

It has been stalling in October near 149 versus the greenback after briefly weakening to 150, the worst in a year.

Against the Singapore dollar, the yen was trading at 109.11 per Singdollar as at 10.18am on Wednesday. The yen has fallen 11.5 per cent against the Singdollar to date in 2023.

To Mr Appelt, the yen is likely to maintain its downtrend, trading between 148 and 152 per dollar for the rest of 2023 as traders position for higher-for-longer interest rates in the United States.

The currency will then slide to between 150 and 155 per dollar by the end of March 2024, according to Mizuho’s forecasts.

The yen last reached that 155-per-dollar level in mid-1990, before Japan fell into a financial crisis that would become known as the nation’s lost decades.

Mizuho is not alone with that call: Goldman Sachs strategists in August said the yen would slip to 155 in early 2024 as local policymakers stay dovish.

Bank of America Securities also expects the yen to bottom out at 155 in the first part of 2024.

The median forecast for the first quarter, however, is 140 against the greenback – a level that implies a rally of 6 per cent over the next six months, according to data compiled by Bloomberg.

Analysts have long been waiting for Japanese officials to adopt a more hawkish stance, potentially abandoning their yield-curve control mechanism.

As Japan’s third-largest bank by assets, Mizuho has closely watched flows to help inform its view on the yen, Mr Appelt said.

He plans to monitor any further stimulus measures planned by the government – and a budget to support them.

If an expanded budget ends up fuelling inflation, then it will give the BOJ “air cover” to exit the yield curve control as soon as this year, he said. BLOOMBERG