USD/JPY has hit a 20-year high this week. The worsening in Japan's terms of trade does raise the question of a structurally weaker yen, therefore, economists at Rabobank have raised their USD/JPY one-month forecast to 128 from 125.

USD/JPY to settle at lower levels later in the year

“In view of the pressure on Japan’s trade and current accounts positions, speculation is building that the value of the currency pair may remain higher for longer.” 

“We have raised our one-month forecast for USD/JPY to 128 from 125.” 

“We see potential for the currency pair to settle at lower levels later in the year, though this will be dependent on expectations regarding the path of US economic growth medium-term and the impact that has on the level of US treasury yields.”