Japan has aimed a lot of firepower at keeping its currency weak, but a stronger yen might be just what the long moribund economy really needs, said Saxo Bank's Chief Investment Officer Steen Jakobsen.
"The government of Japan sort of quasi-promises to maintain a weak yen in order to support and buy time for the export companies," Jakobsen said. "Having a focus only on the export sector takes away from [what] the focus should be: To reform the domestic economy."
Jakobsen's comments came just as Japan appears set to level a double bazooka of easing at its sluggish economy, firepower that appears aimed, at least in part, at wiping out the recent gains in the newly resurgent yen.
The Bank of Japan was widely expected to announce another monetary easing bomb at the close of its two-day meeting on Friday, with analysts anticipating that the central bank would either cut interest rates deeper into negative territory or expand its asset purchase program or both.
At the same time, fresh fiscal stimulus was expected to offer additional cross fire. News agency Jiji reported that Prime Minister Shinzo Abe had revealed a 28 trillion yen ($265 billion) injection, which Reuters estimated at 6 percent of Japan's economy.
The double-barreled approach was in line with Abe's plan to break Japan's economy out of a decades-long deflationary spiral. That effort, dubbed Abenomics, was introduced in 2013 with a plan for three "arrows:" A first arrow of massive quantitative easing from the BOJ, followed by a second arrow of increased government spending and a third arrow of structural reforms, including immigration and labor changes.
But Jakobsen noted that the latest plan for combined BOJ and fiscal easing just replayed the same strategy.
"The present situation we're talking about is just re-launching arrow one and two," he said. "We're still missing arrow number three, which is the reform side."
That's why Japan should shift to a strong yen policy, he said.
"What is needed is a big step away from a policy of devaluing themselves to maintaining export shares," he said.
That would force the government to pursue reforms and companies to become more productive, he said.
Jakobsen pointed to Switzerland as a better model to follow.
"Ninety-eight percent of the world follows Japan's example [on easing], but the most successful country in the world is Switzerland, which does exactly the opposite [as Japan]," he said.
"By virtue of the currency getting stronger, it forces the SMEs [small and medium enterprises] and companies in Switzerland to be productive and innovative and increase the capex expenditure," he said.
Keeping funding costs low -- with Japan's benchmark interest rates already in negative territory and the currency cheap -- doesn't do much to change Japan's economic climate, he said.
Saxo Bank had 14.227 billion ($2.12 billion) in assets under management in its wealth management division and 77.568 billion Danish krone in client collateral deposits at the end of 2015.
—Nyshka Chandran contributed to this article.