The drop in USDJPY last week was the largest since October 2008. Economists at MUFG Bank expect the pair to see further falls.

JPY remains best placed to outperform if peak inflation here

“Peak USDJPY is now likely in place in our view and if that view broadens and the conviction level increases, renewed declines are likely.” 

“Intervention by the Japanese authorities adds another factor favouring JPY outperformance once the fundamental backdrop changes.”

“Our yield spread model that incorporates a Terms of Trade component is signalling the potential for further declines in USDJPY from here. Indeed, the model is more consistent with USDJPY trading closer to 130.00 rather than 140.00. But USDJPY fell by over 10 big figures in just sixteen trading days so we might get some consolidation. However, the rate spread and energy price moves if sustained are consistent with further USDJPY declines.”