USD/JPY is now nearly 10% off its high near 152 in late October. The pair could plunge as low as 125-130 next year, analysts at ING report.

Yen set for out-performance into 2023

“If the Dollar is to move lower in 2023, USD/JPY would be the best vehicle to express the view. This is based on the view that the positive correlation between bonds and equities can break down – bonds rally, equities stay soft – and that the US 10-year Treasury yield ends 2023 at around 2.75%. USD/JPY could be trading at 125-130 under that scenario.” 

“We now suspect that any Dollar rally between now and year-end stalls at 142/145.”

“In addition, USD/JPY will be facing a change in the ultra-dovish Bank of Japan governor next April – a big event risk for local and global asset markets.”