Week in FX Asia – Abenomics First Year The End of Deflation

The December economic report from the Japanese government will be missing a word that has been a staple for the past fifteen years. Deflation will likely not appear in the report as the economic policies appear to be paying off for Shinzo Abe. The report if due December 24 and optimism around economic recovery will likely result in the “D” world not being used. The last time this was seen was in 2009, but the financial crisis aftermath started a decline in growth that Abe plans to reverse.

Prime Minister Shinzo Abe embodies Japan’s economic comeback. Elected prime minister for a second time following a landslide victory for the Liberal Democratic Party (LDP) in December, 2012, the 59-year-old conservative, centre-right politician is keen to ensure his second tenure at the helm of the world’s third-largest economy is far more remarkable than his previous term in office. In his first go-around as prime minister in 2006–07, Abe had the misfortune of succeeding one of Japan’s most popular politicians, Junichiro Koizumi, the fifth longest-serving prime minister in Japanese history. Abe became the 90th Japanese prime minister – and the youngest since the Second World War – on September 26, 2006. But the LDP suffered mightily during his first tenure, and it was ousted from power for the first time in decades. Abe subsequently resigned from politics.

Five years later he returned to the LDP fold, wiser, inspired, and focused. In a July 2013 interview with Foreign Affairs magazine, he admitted he failed to prioritize his agenda during his first reign in office and hard lessons were learned. This time, he would be bold, and he made bold promises to the Japanese people.

The USD/JPY has risen after the combined decision from the US Federal Reserve to start tapering the $85 billion a month in bond-buying stimulus by $10 billion and the Bank of Japan commitment to keep stimulating the economy. The USD/JPY hit five year highs and trade in a 103/104 range.

WEEK AHEAD

* CAD Gross Domestic Product
* USD Durable Goods Orders
* JPY National Consumer Price Index

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza