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Forex pairs in this Article » AUD/JPY, AUD/USD, EUR/JPY, USD/JPY (Barcelona) - Kit Juckes, Global Head of Foreign Exchange Strategy at Societe Generale feels that benchmarking the move to the real exchange rate is important, but it won't stop the Yen falling.

He sees that recent lows in USDJPY are more like a level of around 100 in the early 1990's, as opposed to being comparable to 1995's spike down to 80 in 1995. However, on the other side of the equation, Juckes feels that a move to USDJPY 110 looks like a reasonable 'extreme' target, comparable to the the levels seens in past periods of Yen weakness. He writes, "Put that in EURJPY terms and we can target 130 in extremis, and even if I think AUDUSD 'should' be around parity at some point, that leaves a lot of potential to buy AUDJPY."

He feels that Japan's problems are multiple. The first comes from loss of global export market share. Japanese exports to the US have been left behind by China's export machine. 10-years ago, Japan exported more than twice as much as China to the US. Now, China exports more than twice as much as Japan does. The same story can be seen in the performance of S Korea and Taiwan, and is supported by a look at valuations.

Ultimately, he sees that the result of this is a current account surplus that is slowly fading away, from close to 5% in GDP in 2007, and in 2013 will probably be under 1% GDP. He finishes by writing, "If fiscal expansion by the new administration does anything to revive domestic demand furthermore the surplus will vanish completely. Already, closing down nuclear power plants is going to have a long-term impact on the trade balance. Japan can't really afford to see its exporters suffer any more than they are."
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