USD/JPY has been subjected to a bout of volatility on reports that Kazuo Ueda will be the next BoJ Governor. But economists at Rabobank stick to their USD/JPY forecast.

Scope for a move to USD/JPY 128 on a three-month view

“Given what is known so far, a Bank of Japan with Ueda at the helm has not altered our view of BoJ policies. We continue to expect a very cautious outlook to prevail with conditions building for a modest withdrawal of accommodation this year. We expect this would commence with an adjustment to YCC.”

“Bearing in mind that other central banks are already edging towards peak interest rates and could be cutting rates in 2024, there may only be a limited time-frame for the BoJ to tighten policy without causing undue stress on the JPY exchange rate.” 

“Assuming some relaxation in YCC, we see scope for a move to USD/JPY 128 on a three-month view. However, a hawkish Fed is likely to limit scope for JPY appreciation.”