FXStreet reports that economists at HSBC believe that USD/JPY is likely to remain roughly stable before slowly grinding higher in 2022.

“On the one hand, the JPY is an anti-cyclical “safe-haven” currency, like the USD is. Hence, slower global growth and weaker risk appetite should drive the JPY stronger. But, on the other hand, the JPY is very sensitive to rising short-term US Treasury yields which reflect market expectations of changes in the Fed’s monetary policy. The JPY is a very low-yielding currency, thereby being highly susceptible to depreciation amid rising US interest rates.”

“We believe the JPY’s sensitivity to US yields is likely to overshadow the JPY’s role as a relative ‘safe haven’ at least when measured against the USD, which has a similar risk personality.”

“We expect the JPY to outperform many other currencies, but not necessarily the USD. We see USD/JPY remaining roughly stable for the rest of the year, before slowly grinding higher in 2022 once the Fed’s tapering commences and the focus switches to its policy rate’s lift-off next.”