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Extraction Summary
1
People
2
Organizations
3
Locations
1
Events
1
Relationships
2
Quotes
Document Information
Type:
Financial market research report
File Size:
Summary
This document is page 5 of a Bank of America Merrill Lynch financial research report titled 'Japan Macro Watch,' dated November 14, 2016. It analyzes risks to the USD/JPY currency exchange rate, discussing factors such as US fiscal easing, Chinese currency devaluation, and the geopolitical stance of the US President-elect regarding the Japan-US security alliance. The document is stamped with a House Oversight Bates number, indicating it was part of a larger document production, likely related to financial records subpoenaed during an investigation.
People (1)
| Name | Role | Context |
|---|---|---|
| President-elect | Political Figure (US) |
Mentioned regarding criticisms of the Japan-US security alliance (Refers to Donald Trump based on date).
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Organizations (2)
| Name | Type | Context |
|---|---|---|
| Bank of America Merrill Lynch |
Creator of the report.
|
|
| US Administration |
Mentioned regarding potential rhetoric on USD weakness.
|
Timeline (1 events)
Locations (3)
| Location | Context |
|---|---|
|
Mentioned in context of fiscal easing, yields, and politics.
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|
|
Mentioned in context of currency (JPY), security alliance, and defense spending.
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|
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Mentioned regarding RMB devaluation.
|
Relationships (1)
References to 'Japan-US security alliance'
Key Quotes (2)
"The President-elect has previously criticized the Japan-US security alliance."Source
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Quote #1
"China’s unexpected RMB devaluation or any explicit rhetoric to guide USD weakness by the new US administration could eventually trigger significant JPY strength."Source
HOUSE_OVERSIGHT_014428.jpg
Quote #2
Full Extracted Text
Complete text extracted from the document (1,369 characters)
3 risks – reality vs hope, higher yields, politics
The biggest risk to our view is that actual US fiscal easing turns out to be minimal. But
we believe the USD/JPY’s move will be quicker than whatever reality emerges in coming
months. China’s unexpected RMB devaluation or any explicit rhetoric to guide USD
weakness by the new US administration could eventually trigger significant JPY strength.
The other risk is a rapid increase in US long-term yields triggers risk-off trade,
supporting Japanese yen. However, we believe a potential correction in US equity is
unlikely to reverse the medium-term direction of USD/JPY (though it could cause a
short-term pullback as our technical analysis suggests) because higher yields and
USD/JPY are backed by fundamentals for now –prospect for fiscal easing. Finally, politics
is a significant concern. The President-elect has previously criticized the Japan-US
security alliance. A shift away from the Japan-US security alliance could lead to higher
geopolitical risk for Japan. It could also lead to more defense spending and expansion of
Japanese military capability and could lift prospect for fiscal expansion. A combination
of higher geopolitical risk and defense spending is probably less bearish USD/JPY than
Japanese equities.
The biggest risk to our view is that actual US fiscal easing turns out to be minimal. But
we believe the USD/JPY’s move will be quicker than whatever reality emerges in coming
months. China’s unexpected RMB devaluation or any explicit rhetoric to guide USD
weakness by the new US administration could eventually trigger significant JPY strength.
The other risk is a rapid increase in US long-term yields triggers risk-off trade,
supporting Japanese yen. However, we believe a potential correction in US equity is
unlikely to reverse the medium-term direction of USD/JPY (though it could cause a
short-term pullback as our technical analysis suggests) because higher yields and
USD/JPY are backed by fundamentals for now –prospect for fiscal easing. Finally, politics
is a significant concern. The President-elect has previously criticized the Japan-US
security alliance. A shift away from the Japan-US security alliance could lead to higher
geopolitical risk for Japan. It could also lead to more defense spending and expansion of
Japanese military capability and could lift prospect for fiscal expansion. A combination
of higher geopolitical risk and defense spending is probably less bearish USD/JPY than
Japanese equities.
Bank of America
Merrill Lynch
Japan Macro Watch | 14 November 2016 5
HOUSE_OVERSIGHT_014428
Merrill Lynch
Japan Macro Watch | 14 November 2016 5
HOUSE_OVERSIGHT_014428
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