After 80 yen call, Japan forecaster sees dollar at 50

By Hideyuki Sano

TOKYO (BestGrowthStock) – Japanese market strategist Daisuke Uno made a bold prediction last year that the dollar would fall to 80 yen, and now with that level only 4 yen away, he’s sticking his neck out again.

Uno, who is chief strategist at Sumitomo Mitsui Banking Corp, predicts the dollar will fall to 50 yen as early as next year, as the world’s largest economy sinks to its lowest ebb in a 10-year cycle and as the United States’ global dominance erodes.

“We are seeing a big paradigm shift. U.S. hegemony is crumbling, which will shake the value of the U.S. dollar,” Uno told Reuters.

The forecast is his own, not that of the bank, which does not offer a long-term prediction.

Uno argues the U.S. economy has roughly a 10-year cycle along the lines of the Juglar investment cycle, hitting bottom about every 10 years — in 1982, 1991 and 2001.

Using this pattern, the economy is likely to hit a nadir next year, 10 years after the 2001 recession that followed the bursting of the dot-com bubble, which will push down the dollar.

On top of that, after the credit bubble, the U.S. economy is heading down the same path of economic stagnation as Japan did after its 1980s property and stocks bubble burst.

By his reckoning, bubbles began building in the United States in the early 1990s, popping only in 2008, meaning it will take equally as long — about 14 years — to work through the excesses.

“Since the end of the Cold War, the U.S. has shifted its main industry from manufacturing to finance. And during this period, there was a lot of rosy talk about great moderation or a Goldilocks economy,” he said.

“But you can’t always have good times.”

These burst financial bubbles will not only depress U.S. growth but undermine the free-market capitalism it has espoused, and the realization the world can no longer count on U.S. demand will encourage economic blocs to form in each continent.

“As there will be limited trade between the blocs, the role of foreign exchange rates will become much less important. And the idea of a global key currency may become obsolete,” Uno said.

As such, the dollar could fall to 70-75 yen this year and 50 yen by next September.

Technically, too, dollar/yen broke below a triangle formation dating back to the early 1990s when it fell through 110 yen in early 2008.

This implies the dollar is likely to fall about 60 yen — the height of the triangle — from its breakdown at 110 yen, he said.

As for the euro, this could rise to $3 next year.

While that appears extreme, Uno said last year the euro would fall to $1.10-1.20 in the first half of 2010 and bounce back in the second half, a prediction that has so far proved right.

(Editing by Edmund Klamann)

After 80 yen call, Japan forecaster sees dollar at 50