USD/JPY seen at 146.00 on a three-month view assuming a first Fed rate cut in June – Rabobank

USD/JPY has risen back above the 150.00 level after the BoJ finally ended its negative interest rate policy. Economists at Rabobank analyze the pair’s outlook.

BoJ prospects of hiking rates again this year remain highly uncertain

In today’s policy statement, the BoJ remarked that as ‘indicated by the results of this year's annual spring labour-management wage negotiations to date, it is highly likely that wages will continue to increase steadily this year’. This has supported the Bank’s confidence that its price stability target is in sight. 

Assuming the strong pay deals awarded to unionised workers spread out to the 70% of employees who are not in a union, Japan’s real wage growth could soon be turning higher. Policymakers will be hoping that this boosts consumption which in turns supports corporate profitability. This would indicate that the BoJ’s virtuous cycle is complete. So, while the BoJ may be able to hike rates again this year, this prospect currently remains highly uncertain. 

Our three-month USD/JPY forecast of 146.00 assumes a first Fed rate cut in June and an improvement in Japanese real wage data. Our 12-month USD/JPY target is 140.00.