Enzio von Pfeil

Dollar Could Tank vs. Yen By End of Year

I am not so confident that one should view BoJ policy with Western eyes. My years in Asia teach me that especially in Japan, policy-making is "tribal": no "one" individual stands out, as say a Prof. Bernanke or a Claude Trichet...

My take is different: that next year, Japan has to raise its VAT considerably, as they on 7th July decided to cut their primary deficit to zero by 2011. We all know how badly the economy and market fared in 1989, when they introduced VAT, and in April, 1997, when they increased it. So one member of the tribe, the MOF, will oppose rate hikes on top of tax hikes.

Another member, the future PM, Abe, also will oppose: he won't want to start his stewardship by allowing Japan to dunk into recession yet again.

My favorite fx play: long Euro, long Pound, short yen.