StanChart Bank expects weaker yen going forward

Japanese markets recover a tad on Thursday, after cracking nearly 6 percent. Steve Brice, Standard Chartered Bank believes it is a strong market, which was looking for an excuse to pullback, provided by Bernanke still being dovish.

Talking on dollar-yen, he says he is still biased towards a weaker yen going forward. He is feels that BOJ does not want Japanese Government Bonds (JGB) yields to spike up significantly. The BOJ is still printing money at quite a decent clip. Also read: Weak yen a help for Japan, but headache elsewhere Below is the verbatim transcript of his interview to CNBC-TV18 Q: What according to you is the big reason for which the Japanese market is correcting so much this morning? What is your prognosis for the Nikkei going ahead? A: We have seen Japanese equity markets perform extremely well for an extended period and without any pause or break. It was really a strong market that was looking for an excuse to have some sort of a pullback. The bigger picture, the Fed discussion is still there. People were reading into that in terms of saying "Okay. Bernanke is still dovish and does not seem to want to move anytime soon." We have some members moving in that direction just reaffirming that the next move is going to be a tightening. All of these things have come together and created some sort of pullback, particularly for Japan, but also across Asia. Q: What would this mean for the dollar-yen? A: We will get through it. We still got a bias for a weaker yen going forward. The BOJ is still printing money at quite a decent clip. We would expect them not to want Japanese Government Bonds (JGB) yields to spike up significantly. In that environment if they want to stop that happening they may even have to accelerate the purchases of JGBs at some point in the future. The commitment they have shown has been fairly clear from day one of Abe's leadership or even prior to that. I think that is going to continue. So, we still have a bias for the dollar-yen moving higher. We did have comments from the economy minister saying maybe we should not go too far. It really did not go too far too fast, but bias for yen weakness probably towards 105-110 is still there. Q: Are you getting a sense as well that not just from the Fed, but from the Japanese government as well there may not be too much by way of incremental stimulus going ahead? A: We do not see a sea change in terms of a generalized shift. If you look around most of Asia the bias is still to easing policy. There are pockets. The Fed is the main one. Even in China we have seen some specific targeted tightening measures coming in. Wealth management products in the property sector, but overall we still see the bias outside of the US as being generally towards looser policy settings rather than tight policy settings. We have to remember that Fed is not going to do anything unless the data is significantly stronger than where we sit today. Our view is that yes, we are going to go there and that is going to take sometime. The Fed is doing its usual job of fragging things early, getting people used to the idea before they actually do it. So, there is no shock when they actually start rolling back QE.