Too soon to call the major turn in the yen?

Next month’s elections in Japan are unlikely to mark the major shift towards yen weakness that many now anticipate. To be clear, in the next 3-5 years the yen probably will fall sharply. After all, the Bank of Japan will surely be one of the last of the world’s major central banks to raise interest rates and Japan’s current account surplus is rapidly diminishing too. But with monetary policy also set to remain easy in the US and Europe for a long while yet, we continue to expect the yen to appreciate again in 2013 on the back of safe haven demand.