Forex Flash: Good case for weaker JPY over the years ahead - RBS

FXstreet.com (Barcelona) - On the back of last Friday's BoJ semi-annual Outlook for Economic Activity and Prices, as Greg Gibbs, currency strategist at Royal Bank of Scotland, notes, "they forecast CPI inflation (less fresh food) at +0.7% by end March 2014, 1.4% by end March 2015 and 1.9% by end March 2016 (excluding the effects of the proposed consumption tax hikes)."

"This represents a big turn around in inflation in a short space of time, and most economists are sceptical that inflation will rise so much given it has been mired in deflation for essentially two decades" Greg said.

In the months to come, as Greg adds: "If the JPY stalls, and Japanese asset prices stall, inflation is also likely to stall. So over the months ahead as we approach the target dates for Japan inflation, the pressure will increase for the BoJ to do even more easing. This is further reason to see a weaker JPY trend evolving over the years ahead."