Analysts at CIBC forecast the USD/JPY pair could continue to rise during the next months at a slow pace. They see the pair at 114 during the fourth quarter and at 115 in the first quarter of next year.
“While the RBA recently moved away from yield curve control, it seems unlikely that the BoJ is set to follow suit anytime soon. Following a meeting between BoJ Governor Kuroda and PM Kishida, post the recent LDP election victory, the former acknowledged that not only does the bank remain committed to its 2% CPI target, it also will maintain YCC, even beyond Covid. The perpetuation of an ultra-easy BoJ policy stance is set to leave Japan alongside the eurozone and Switzerland as extending long term policy inertia, a scenario which should continue to leave the JPY on the defensive.”
“Post the re-election of the LDP, we can expect another round of fiscal stimulus. Press reports suggest a potential injection of around JPY35trn, which could even include cash handouts to youths and children. While we expect Q3 weakness to give way to a solid rebound in Q4 GDP as the economy re-opens, the extension of yield curve control will see a sizeable widening in USTJGB 10 year spreads, providing the rationale for ongoing outflows of capital looking for higher returns overseas.”
“One risk to our weaker yen scenario that bears watching is the sheer scale of existing JPY shorts. Speculative investors have continued to add to those positions over recent weeks, and leveraged shorts are threating extremes not seen since December 2018. The scale of the position skew risks a JPY corrective rally should risk sentiment prove to become materially compromised into year-end, but we would still maintain our medium term outlook for a weaker yen into 2022.”
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.