A look at what's in store for the Year of the
Monkey
With
2015 winding down, Hiroshi Watanabe, governor and CEO of the Japan Bank for
International Cooperation, has given his forecast for what 2016 will hold.
As next year is the Year
of the Monkey, Watanabe's predictions come in the form of six keywords whose
initials spell out the word "monkey."
M is for the Middle East
and its ongoing turmoil, which has seen both resolution and uncertainty. In
July, Iran and a group of six nations led by the U.S. reached a historic
agreement over Tehran's nuclear program. But more recently, countries have been
at odds over how to tackle the Islamic State militant group.
After Paris was hit
by simultaneous terrorist attacks in mid-November, Turkey shot down a Russian
military jet near the Syrian border, saying the jet had violated its airspace.
Russia and France have joined hands to fight against such terrorists, echoing
their 19th-century alliance.
At the same time, cheap
crude oil prices are threatening the economic and political stability of Saudi
Arabia and other oil-producing countries.
O stands for odds,
specifically those of the various U.S. presidential candidates. Former U.S.
Secretary of State Hillary Clinton is far ahead of her rivals in the Democratic
primaries, while it is still unknown if the controversial billionaire businessman
Donald Trump will become the Republican nominee.
If Clinton is
elected, the U.S. will likely have a divided Congress, with Democrats
dominating the Senate and Republicans occupying the majority of the House of
Representatives. It is unclear how congressional approval for the Trans-Pacific
Partnership and other important issues will be resolved.
N denotes the new
paradigm of monetary policy. With the U.S. Federal Reserve ready to hike
interest rates in the near future and the European Central Bank heading for
additional monetary easing, a major theme in the coming year will be the
"great divergence" across the Atlantic. In Japan, Bank of Japan Gov.
Haruhiko Kuroda has indicated his willingness to implement additional monetary
easing. This would be done to support the government as it attempts to encourage
private investment and wage hikes through corporate tax cuts and other
measures.
Political
jitters
K stands for the unpredictable situation on
the Korean Peninsula. The regime of North Korean leader Kim Jong Un is
faltering and could collapse as early as next year. The risk of political
turmoil is especially unwelcome given that the government of South Korean
President Park Geun-hye is not as stable as it could be, either.
E refers to both exits and entries. The risk of a
"Grexit" -- Greece's potential exit from the eurozone -- has largely
passed, but the question next year will be whether the U.K. stays or goes the
European Union. On the entry side is the flood of refugees from Syria. Even
German Chancellor Angela Merkel's government is starting to come under pressure
as its faces criticism for allowing such an influx of refugees into the
country.
Lastly, Y stands for the
yuan's devaluation. The International Monetary Fund on Monday decided to
include the Chinese currency in its Special Drawing Rights currency basket. But
with China's economic slowdown continuing, it is natural to expect the yuan to
face downward pressure.
Furthermore, the
divergence in economic circumstances and monetary policies between Japan and
the U.S. is likely to put downward pressure on the yen, too.
For Japan, the biggest
wild card for the Year of the Monkey is the possibility of a double election
next July. If elections are called for both houses of the Diet, Prime Minister
Shinzo Abe's government could propose further delaying or even scrapping the
consumption tax hike scheduled for April 2017.
YOICHI TAKITA, Nikkei senior staff writer
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