JPY: Current account surplus to remain supportive - MUFG

Derek Halpenny, European Head of GMR at MUFG, notes that the yen has weakened again versus the US dollar after a brief period of strength helped by BOJ Governor Kuroda’s comment that downside risks to the global economy were “high” and a comment from a former government official who worked with Kuroda that the BOJ could ease again in July.

Key Quotes

“But the data released today should serve as a reminder as to why the Japanese yen is the best performing G10 currency so far this year. Japan’s current account surplus jumped to JPY 2,980.4bn in March and the first quarter surplus totalled JPY 5,936.1bn, up from JPY 4,373.5bn in the same quarter last year – a 36% increase. On an annualised basis, the Q1 surplus is roughly 4.6% of GDP.

Historically, that is a very large surplus and is likely to continue playing a role in supporting the yen. Of course, the offset of that is the unprecedented BOJ monetary stimulus through JGB purchases, which will also play a key role in limiting yen strength.”