PEC’s Japan strategy:The BOJ and Kevin Brady

We believe that Investors are keen for an anchor, to help identify President-electTrump's macro-economic policy priorities. The implementation program wouldhave to go through the House Ways & Means committee, and its Chairman,Kevin Brady. We examine the latter’s beliefs looking for commonality.

The BOJ would welcome higher US bond yields on a sustained basis. Thisyear’s appreciation of the Yen has been a headwind to the BOJ’s policy goal of2% CPI on a sustained basis (and an overshoot). A widening of 10-year bondspreads (the US versus Japan) enables an easier recycling of Japan’s currentaccount surplus. Reflecting the recent 30bp increase in the bond spread, and itslikely persistence, inside, we revised our US$/￥ forecasts in the 15 November2016 The Global Macro Outlook: 25bp from the US Fed in December.