This snippet from Westpac on what they expect for USD/JPY, and why:
- Whether the Bank of Japan decides to loosen Yield Curve Control or raise the level of interest rates outright is arguably not the primary point to focus on for the Yen’s outlook.
- In our view, instead it is the speed and scale of rate cuts in the US, accentuated by Japan’s exposure to robust growth across the Asian region.
To the extent that we see 200bps of FOMC cuts in 2024 and, most likely, further easing through 2025, we anticipate USD/JPY will abruptly reverse course over the coming 12 months from JPY141 to JPY136 end-2023 and JPY128 end-2024. Timing this downtrend is subject to considerable error, but the forecast end-2024 level seems readily achievable given the Yen traded around JPY115 in early-2022.