Improving growth prospects in Japan do not necessarily correspond to improving Japanese currency prospects, argue analysts at Wells Fargo. They point out that with inflation still absent, the Bank of Japan is set to maintain an accommodative monetary policy for the foreseeable future. They forecast a USD/JPY exchange rate of 120.00 by early 2023.
“For the time being, a brief period of yen stability is possible, given some recent declines in global bond yields and existing FX positions. IMM currency futures, for example, show speculative yen short positions near their largest levels since 2019, potentially limiting yen softness for now. However, we do expect global bond yields to show a renewed rise in the months and quarters ahead as inflation pressures persist.”
“U.S. price pressures in particular remain quite robust, with the U.S. October CPI rising 6.2% year-over-year. As U.S. inflation remains quite elevated by historical standards and the Federal Reserve winds down its quantitative easing program by mid-2022 and starts its rate hike cycle before then end of next year, we see U.S. 10-year Treasury yields rising to 2.20% by early 2023.”
“With Japanese yields unlikely to follow U.S. yields perceptibly higher, we expect that will translate into a weaker yen versus the U.S. dollar, and target and USD/JPY exchange rate of JPY120.00 by early 2023.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.