Who Is Sakakibara and Why Does He Say Awful Things About the Yen?
February 6, 2017
Dennis Gartman is editor and publisher of The Gartman Letter, and strategic advisor of the AdvisorShares Gartman Currency Hedged Gold ETFs (GEUR & GYEN). He regularly contributes to AlphaBaskets and lends his institutional insight to educate advisors and investors about commodities and the forex markets, including about trading gold in different currency terms.
We note regarding the Yen that Mr. Eisuke Sakakibara… a gentleman once very commonly referred to as “Mr. Yen” and referred to as such with very good reason for his comments when he was the Vice Deputy of Finance for International Affairs would indeed move the forex market materially and often very materially so; further, he was always one of the true gentleman of the business when he communicated with us… said in an interview with Reuters over the weekend that he’d not be surprised to see the Yen trade below “par” sometime this year! When Mr. Sakakibara speaks, even twenty years after his tenure at the MOF, we pay heed.
Why is Mr. Sakakibara concerned that the Yen could trade to and then through “Par?” He is so because he fears what Mr. Trump might say and what Mr. Trump believes regarding foreign exchange. Mr. Sakakibara is concerned that the President does note understand the implications of a strong Yen and wants to see a weaker US dollar. Mr. Sakakibara believes… probably very rightly so… that the Yen/dollar shall be “high on the agenda” when Mr. Trump and Mr. Abe meet later this week in Washington. The President almost certainly shall press for a much weaker dollar, supported in that position by Mr. Navarro, the President’s “advisor” on the economy.
We are of the opinion… as we have been for quite some long while… that Japan needs the Yen to trade well through 150 and the fundamentals of demographics along with the BOJ’s continued experiment with QE would normally be sufficient to push the Yen down to that level. However, the President has a very vocal “bully pulpit” and although his economics are 180° wrong regarding the balance of trade and other concerns, his bully pulpit can be a very powerful weapon if used improperly.
Regarding Europe, it has been some while since Greece was on the front pages. Greece is presently out on the far wings of the world stage but may soon move back into the heated klieg lights for on the 20th of this month the Eurozone finance ministers will meet once again and they will argue that Greece has not… and cannot… meet the requirements put upon the country to run a primary budget surplus of 3.5%. We have always thought that this demand was patently lunatic for there is no way whatsoever that Greece can or should meet that demand without doing even greater damage to the populace. Nonetheless, if Greece does not meet those demands further austerity demands will be forced upon her, including further cuts in pensions and tax increases.
If this happens… and almost certainly it shall… then again we shall hear the calls on the part of the Greek Left and the Greek Right to withdraw from the European monetary and political unions. We do not envy Prime Minister Tsipras his position… not even slightly. As the Greek problems make their way back to the global center stage, we can imagine the EUR coming under attack and for the EUR/CHf cross to trade down through 1.0650 in the process as frightened, “informed” capital continues its exit from “The Continent.”