Today's edition of the Saxo Morning Call features the SaxoStrats team discussing the continuing weakness of the US dollar as commodity prices recover ground and in the wake of key US equity indices hitting all-time highs Thursday.
Article / 18 November 2014 at 7:24 GMT

Japan snap election and sales tax announcement in the works

Global Macro Strategist / Saxo Bank Group - Singapore Hub
  • JP equities were sold off and USDJPY came off yesterday - a knee-jerk reaction
  • Remain very positive and bullish on USDJPY as well as Japanese equities
  • We are in the 116-120 trading range for the next six months

By Kay Van-Petersen

I think there is a very high probability of already getting an announcement this afternoon that will call for a snap election as well as issue a delay to the sales tax hike decision.

Some key dates to keep in mind that we are hearing:

  • If parliament was to be dissolved immediately, early December would mark the start of a snap election, with a final election date around mid December (14-16)

  • Abe has the power to do this without voting needed by the house
  • April 2017 the proposed date at which the sales tax hike will be postponed

  • Here the House would have to vote on a changed and new tax bill

  • There is also chatter about a potential stimulus package, with numbers as high as USD42 bilion (JPY 5 trillion) being heard. There also seems to be a question of quality stimulus versus quantity stimulus (ie they don't have that much more money to spend)

If no announcement comes out today, we'd expect a near virtual certainty of an announcement within the next two weeks.

I believe the knee jerk reaction yesterday was incorrect whereby JP equities were sold off and USDJPY came off, hitting a low of 115.46 after an initial high of 117.05.

USDJPY - today

Net Net - my views are structurally intact, very positive and bullish on USDJPY as well as Japanese equities (just hedge the FX). The recession only magnifies the pressure and extent that both fiscal and monetary policies in Japan will have to be that much more accommodative. We also have not seen the full ripple and domino effect of the GPIF pension fund re-allocations feeding through to the rest of the AM, HF and retail investment spheres.

Nikkei today

I still think we are in the 116-120 trading range for the next six months, with the second half of 2015 taking us over 120, in the 120-125 range - most likely from the initial Fed hike next year - and I'd expect us in north of 130 in 2016

The Nikkei closed today at 17,344, which was +2.2% on the day. USDJPY was last at 116.70, pretty much flat for the day (compared to our +1.5 figures moves yesterday)

A profitable trading day to you all.

Kay Van-Petersen is Asia macro strategist at Saxo Capital Markets in Singapore

Kay Van-Petersen Kay Van-Petersen
Also worth bearing in mind, that the views on whats going on in JP & price action on JP equities in particular are diverse. My colleague and equity specialist Peter G. has a different take that can be seen here:


The Saxo Bank Group entities each provide execution-only service and access to permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on or as a result of the use of the Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. When trading through your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of ourtrading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws. Please read our disclaimers:
- Notification on Non-Independent Invetment Research
- Full disclaimer

Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail