The Future of the Foreign Exchange Market 第98回［田嶋智太郎］
Tomotaro Tajima Profile
Economics analyst. Alfinaunts representative director. Born in 1964 in Tokyo. After graduating from Keio University, he switched career following his time at Mitsubishi UFJ Securities. He analyzes and researches a wide range from finance and economics in general to strategic corporate management, and even personal asset formation and fund management. He serves as a lecturer for lectures, seminars, and training organized by private companies, financial institutions, newspapers, local governments, and various business associations, giving around 150 lectures annually. He has been a prolific writer for print media, including serialized columns and comments in Weekly Gendai “Rules of Net Trading,” Examinations “Money Maestro Training Course,” among others. He also writes columns on many websites about stocks and foreign exchange, earning high evaluations as a stock and forex strategist. He has also written for Libre Publishing’s “K studen Knowledge” home economics section. After regular TV appearances (TV Asahi “Yaju-ama Plus,” BS Asahi “Sunday Online”) and radio (Mainichi Broadcasting “Tsurugi’s Asa-chi Radio”), he currently serves as a regular commentator on Nikkei CNBC “Market Wrap” and Daiwa Securities Information TV “Economy Marche.” His major DVDs are “Super Easy: Tomotaro Tajima’s FX Introduction” and “Super Easy: Tomotaro Tajima’s FX Practical Technical Analysis.” His major books include “Wealth Review Manual” (Paru Publishing), “FX Chart ‘Formula for Profit’” (Alchemix), “Why Can FX Make You Asset Rich?” (Text) and many others. The latest publication is “How to Profit by Riding the Rising U.S. Economy” (Libre Publishing).
※This article is a reprint and rewrite from FX攻略.com June 2018 issue. Please note that the market information described in the text may differ from current market conditions.
Do US and Japanese political factors have a shelf life too?!
At the time of writing, the market was being tossed by a storm of political uncertainty in both the US and Japan, making risk-off sentiment quite pronounced. As is well known, the U.S. President formally announced on March 22 an tariff measures imposing high duties on Chinese-made products worth about $50–60 billion, citing alleged IP infringement by China.
In response, on the 23rd, the Chinese Ministry of Commerce announced it was preparing counter-tariffs against the United States. A spokesperson for the Ministry stated, “We urge the United States to resolve China’s concerns as quickly as possible, to overcome differences through dialogue and consultation, and to not impair the overall bilateral cooperation.” In short, for the time being, the path of “dialogue and consultation” is a key factor.
Nevertheless, it is not hard to imagine both countries pushing into a destructive trade war. The market at the time remained highly wary and heightened risk-averse behavior, but by the time readers see this article, a different direction may be emerging (avoiding full-scale war). Therefore, I will refrain from unreasonably pessimistic predictions here.
The U.S. president’s “election (approval rating boost)” motive is obvious, but considering that he is often described as having “a businessman’s keen nose,” there is a possibility that overt protectionism could trigger further sharp stock declines or significant damage to the domestic economy, leading to a downturn in the economy, which should not be passively overlooked. On the other hand, the U.S. economy’s growth is finally starting to accelerate. Moreover, large-scale fiscal spending, including major tax cuts, is expected to add to this effect.
These fundamental factors tend to surface temporarily only while the market pays particular attention to political factors. Indeed, sensational phenomena such as “the resignation/dismissal domino of key officials in the Trump administration” or highly impactful topics like “the confrontation structure between the U.S. and China” can be used as a justification for investment decisions for a while.
However, even such “stories” naturally have an expiry date, and eventually the focus returns to the original fundamental factors. This is also true for the ongoing issue in Japan surrounding the “Moritomo Gakuen” case (the alleged falsification of documents related to the sale of government land).
The current cabinet’s support rating has fallen to what can be called a “dangerous” level, and the situation is expected to remain uncertain for a while. Nevertheless, regardless of how events unfold, the fact remains that the Bank of Japan’s monetary policy cannot be easily reversed. As a result, the interest rate gap between the U.S. and Japan is expected to widen, with occasional detours, and ultimately trends toward a stronger dollar and weaker yen, in my personal view.
