The past week’s Japanese data included some soft spots, but they were not bad enough on their own to justify a more bearish view on the yen. The relative optimism about the US economy and expectations of earlier tightening from the Fed have also been overdone. Nonetheless, even though the recent sell-off may be short-lived, we continue to expect the Japanese currency to fall to 100 against the dollar by end-2010 and further still in 2011, primarily on the fiscal outlook.
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