Yen Weakness May Spur Global Growth Paced by Asia, Sinche Says

Japan’s efforts to stimulate its economy could lead the yen to weaken further and help spur global growth starting in Asia, according to Pierpont Securities’ Robert Sinche.

Investors have more confidence in Prime Minister Shinzo Abe than they’ve had for a Japanese leader since at least September 2010, with more optimism about Abe’s policies than for his counterparts in the U.S., Europe and China, a worldwide poll of investors, analysts and traders who are Bloomberg subscribers showed.

“The impact on the rest of the world could come throughout Asia,” Sinche, Pierpont’s global strategist, said in an interview on Bloomberg Television’s “Surveillance” with Tom Keene. “The yen was really seriously, seriously overvalued versus the dollar. This has restored some better balance between the two currencies.”

The yen has declined 24 percent against the dollar since the end of September, falling as low as 103.13 per dollar today in trading in New York, the least since October 2008. It is the worst performing major currency tracked by Bloomberg during that period.

The Bank of Japan’s plan to spend 7.5 trillion yen ($73 billion) on monthly asset purchases may lead other central banks in the region to also initiate competitive stimulus measures, which could boost economic activity, Sinche said.

‘Some Decisions’

“We could be seeing a little bit of that in Asia as we go through the rest of the year,” Sinche said. “As Japan adopts quantitative easing, they’ve weakened up the yen and that’s now making other central banks in the region having to make some decisions.”

The Bank of Korea lowered the benchmark seven-day repurchase rate to 2.5 percent from 2.75 percent on May 9, joining global easing from Europe to Australia. The decision of Governor Kim Choong Soo and his board to cut borrowing costs for the first time since October came as a weak yen dims the outlook for the nation’s exports and record household debt weighs on consumption.

“Corporate Japan likes the weaker yen, I think corporate Korea doesn’t,” Sinche said.

The number of respondents to the poll who are more optimistic than pessimistic on the impact of Abe’s plans on Japan’s investment climate rose to 66 percent this month from 54 percent in January, the Bloomberg poll showed.

Japan Opportunity

Japan offers one of the top two opportunities globally in the next year, according to 33 percent of respondents, up from 21 percent and beating China for the first time in surveys dating back to 2009.

The pace of yen weakness has outpaced strength in the U.S. dollar, Sinche said.

“This is definitely not a strong dollar,” Sinche said. “The dollar is now, adjusted for inflation, weaker than any time since 1981 against emerging-market currencies. The dollar is very competitive against emerging currencies. That’s a good thing in terms of exports.”

Investors looking to bet on further declines in the yen should continue to buying U.S. dollars, while the “Aussie dollar is close to being cheap,” Sinche said. “If we’re right that Asia’s going to start stimulating some more, there’s probably a better environment for the Aussie dollar in the second half of the year.”

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