State Street Defies Weak-Yen Consensus on Inflation Prospects

State Street Global Advisors Inc. is taking a contrarian stance on the yen, forecasting the currency will strengthen as much as 7 percent versus the dollar by year-end, even as peers see it sliding.

“We’ll see the yen appreciate versus just about everything this year,” according to Collin Crownover, the money manager’s Boston-based head of currency management. “The Bank of Japan probably won’t do the amount of easing that’s priced into the market. As people start to price that out, is when you see a rally in the yen.”

State Street, which oversees about $2.45 trillion, expects the yen to strengthen to 112 or 113 per dollar by Dec. 31 from about 120, Crownover said Wednesday during an interview in New York. The median forecast of 65 analysts surveyed by Bloomberg puts the yen at 125 per dollar by the end of December.

The yen’s decline has stalled this year after the Bank of Japan ramped up its unprecedented program of stimulus in October to try to spur inflation in a nation that’s suffered two decades of stagnation. While core prices remain well below the central bank’s 2 percent target, surveys show companies and households raising their inflation expectations. Policy makers maintained their pace of bond purchases at a meeting Wednesday.

Households see inflation at 3 percent in a year while companies forecast price gains of 1.4 percent, the Bank of Japan said last week.

The central bank is likely to move away from initiating further stimulus amid that price outlook, Crownover said.

“It doesn’t look to me like they’re falling into a deflationary trap that would require more action from the BOJ any time soon,” said Crownover. “There are some underlying signs of a robust economy.”

Twenty-two of 34 economists in a Bloomberg survey conducted March 31 to April 3 forecast the Bank of Japan will expand monetary stimulus by the end of October.

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