Bank of America believes 2024 could be a transformative year for the Japanese yen (JPY) by implementing NISA (Nippon Individual Savings Account), a tax-exempt investment account for individuals.
The bank expects this move to expand the retail investor base and increase the volume of retail investments, which could lead to a significant impact over time.
the main points
1. Expanded Nysa: The expanded body will come into effect in January 2024, allowing individual investors to invest in domestic and foreign securities and mutual funds free of capital gains and dividend tax. Bank of America believes that this will broaden the base of retail investors and increase the size of their investments.
2. Potential to invest in overseas assets: Given the low bias toward homes among retail investors, Bank of America expects a significant portion of the NESA-led investments to flow into overseas assets. Although the direct impact may not be immediate, the indirect impact of an expanded investor base can be significant over time.
3. Increased use of NISA tsumitate: Since 2021, the NISA tsumitate (dollar average cost) has been increasingly used by retail investors. This investment strategy allows investors to create a dollar-cost-averaging program for mutual funds. Flows through NISA are likely to be less price sensitive than normal forms of investment.
4. High global inflation and limited Fed rate cuts: If global inflation continues to rise and the scope of the Fed’s rate cut is limited, households may be urged to diversify away from yen cash and deposits to protect their purchasing power, which could put pressure on the yen.
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This is via the folks at eFX.
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The weekly chart shows that the yen is already under pressure: