The diverging prospects for monetary policy in Japan and the US have resulted in a renewed weakening of the yen in recent weeks. With price pressures set to remain subdued, we think that the Bank of Japan will have to step up the pace of easing before too long, perhaps as early as October. The upshot is that the currency should continue to depreciate, which would lift the yen-value of exports and repatriated earnings from overseas subsidiaries. Our end-2016 forecast for the yen is 140 against the dollar, while we expect the Nikkei to climb to 23,000.
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