“仅仅由于日本遭受了重大自然灾害，并不意味着日元会贬值，”野村证券（Nomura Securities ）分析师上周日在发送给客户的报告中指出。
Investors fled Japanese stocks Monday, sending market indexes down 6%, in the wake of Friday's 8.9-magnitude earthquake and a devastating tsunami. Japan's costliest quake ever left power infrastructure in tatters, promising that an already stretched government budget will be strained further by massive rebuilding costs.
You'd think that might be a recipe for a snapback rally in the dollar, which has lost 10% against the yen over the past year -- at a time when Japan's fiscal picture has if anything come to look even more desolate than ours.
Yet the dollar failed to snap out of its torpor. The U.S. currency was flat in trading Monday, leaving it just 2 yen or so from its all-time low against the yen – a record that was set in 1995, three months after a comparably costly disaster, the Great Hanshin or Kobe earthquake.
Just what has to happen to get the dollar to rise? With the U.S. recovery sending mixed signals and the Federal Reserve pledging to hold interest rates near zero for a long time, the bar seems to be set pretty high.
"Just because Japan has suffered substantial damages does not mean that the yen will weaken," analysts at Nomura Securities wrote in a note to clients Sunday.
Part of what's keeping the yen high is the flow of funds back into Japan for the payment of insurance claims. Nomura estimates these at $8 billion to $11 billion over coming months – a substantial sum but one that foreign exchange strategist Jens Nordvig says is not "sufficient to dominate the overall yen flow picture."
He and others at Nomura say a bigger factor driving fund flows into the yen in coming months could be a rise in risk aversion, as investors take a more cautious stance following a two-year-long stock market rally.
If the yen rises to challenge the 1995 high, the Bank of Japan might well start selling yen and buying dollars in foreign exchange markets, in a bid to keep the exchange rate at a level that doesn't choke off too much domestic growth. This is not usually a move that's apt to make other central bankers happy, but they will grin and bear it given the circumstances.
"Over the short term, the strong yen bias could increase, but we think authorities are more likely now than before the earthquake to intervene," Nomura's Taisuke Tanaka writes. "If a negative chain reaction were to occur in which the damages from the earthquake lead to a further strengthening of the yen, Japanese authorities would likely be justified in taking action to stem the yen's appreciation."
The dollar's weakness against the yen is anything but isolated, of course. The trade-weighted dollar index is down by more than a third over the past decade, and the euro continues to trade near a 52-week high in spite of questions about whether Portugal will need a bailout.
The notion that the U.S. economy will outgrow Europe and Japan doesn't seem to count for much at the moment.
That said, Tanaka and others expect to see the yen pull back from its highs near 80 to the dollar to trader nearer 90 over coming years, as the global recovery gains strength and the Fed slowly removes its support for the economy. But as the past few days have shown, there are an awful lot of risks looming over even the most basic forecast nowadays.