Expectations of more aggressive monetary easing from the Bank of Japan have weakened the yen, even though there is already little practical difference between its stance and that of the Fed. On balance, we continue to think that demand for a safe haven from the crisis in the euro-zone will keep the yen firm for the next year or two. But thereafter, the eventual normalisation of interest rates in the US and the diminishing current account surplus in Japan suggest that the yen should fall more sharply.
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