Yen weakness unlikely to last

The yen weakened further against the dollar in November as the opposition LDP leader called for more aggressive easing from the BoJ. But this month’s elections in Japan, which the polls still suggest the LDP will win, are unlikely to mark a major shift towards yen weakness in the near term at least. After all, monetary policy is also set to remain easy in the US and Europe for a long while yet, and the renewed escalation of the crisis in the euro-zone that we expect could boost demand for the yen as a refuge. We continue to forecast that Japan’s currency will appreciate again in 2013. This should also undermine Japan’s stock market, which was a star performer last month.