FXStreet reports that economists at TD Securities note that USD/JPY has rocketed higher in line with the move of the EDZ2-EDZ3 calendar spread and suggest that could keep the pair elevated near its 2021 highs.

“One needs to look no further than the repricing euro/dollar curve where Z2Z3 has widened rather appreciably. While one could argue that policy tightening may be a bit premature, there isn't much in the way of a catalyst to material derail it.”

"The market seems to have gotten over its Evergrande craze. What's more, one could also argue that the lack of a terminal rate adjustment suggests that the risk is towards more hawkish repricing further out the curve that could further weaken the JPY. Taken in conjunction with our short US 10y real rates position (targeting -60bp), the yen seems like it will do nothing but struggle."

“The cyclical highs near 112 beckon in USD/JPY.”