USD/JPY forecast for 01.09.2020

September 1, 2020

USD/JPY forecast: Yen accepts the resignationDmitri Demidenko

Fundamental Yen forecast for today

Shinzo Abe is no longer the Japanese Prime Minister, but “Abenomics”

should continue

The Fed’s decision to change the inflation target for the first time since 2012 was not the last market shock of summer. Shinzo Abe has announced his resignation for health reasons after eight years of serving as the Japanese Prime Minister. Abenomics, based upon “three arrows” of monetary easing, is one of the world’s most famous economic management strategies. Investors are concerned that the new prime minister will continue the economic policies advocated by Shinzo Abe. The increased demand for safe havens has sent the [USD/JPY][1] down to the bottom of figure 105.

During the term of Shinzo Abe, the capitalization of TOPIX doubled, and unemployment fell to its lowest level over 25 years. Nonetheless, other global stock indices grew even faster, and the drop in unemployment is associated, first of all, with the reduction in the labor force. 25% of the Japanese population is aged 65 or above. Older people in Japan should make up 80% of its total working population. Aged people prefer saving to spending, which will weigh on the inflation rate. The fruitless struggle to raise consumer prices has become a typical feature of Abenomics.

I do not think the official Tokyo will abandon Abenomics. A strong contender to succeed Abe as prime minister is Yoshihide Suga, a longtime lieutenant of Shinzo Abe. I do not think the Bank of Japan will cease to control the yield curve. If the BoJ cuts the interest rates, it will damage the bank system, which already faces an increase in problem loans due to the pandemic.

Dynamics of government bond yields in Japan and USA

![LiteForex: USD/JPY forecast for 01.09.2020][2]

Source : Trading Economics

Therefore, Abe’s resignation is likely to be one-time political news. The flows of investment capitals should determine the USD/JPY further trend. Thus, Warren Buffett’s decision to increase the share of Japanese companies in the portfolio to 5% with the prospect of growth to 9.9% looks much more significant for Forex than the departure of Japan’s prime minister. The US stock market is costly in terms of P/E compared to the Japanese peer.

Dynamics of P/E ratio of Japan’s and global stock markets

![LiteForex: USD/JPY forecast for 01.09.2020][3]

According to Goldman Sachs, foreign investors will spend $300 billion to buy the US equities in 2020. The Japanese investors are the largest holders. If investors, following Buffett, buy Asian securities, the [USD/JPY][1] downtrend will continue. Societe Generale and Eisuke Sakakibara, known as Mr. Yen for his ability to influence the exchange rate in the late 1990s, believe the [USD/JPY][1] could drop to 100. In my opinion, the dollar will continue falling versus the yen if the US jobs report is weak, and the pair breaks out the support at 105.2.

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Price chart of USDJPY in real time mode

![USD/JPY forecast: Yen accepts the resignation][6]

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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