USD/JPY will likely remain volatile over the near term. Economists at HSBC modify their USD/JPY forecasts for the upcoming quarters but maintain their year-end 2023 view of 120.

The rationale supporting JPY’s appreciation in 2023 remains intact

“We expect USD/JPY to be quite volatile over the near term because of external uncertainties; however, a stock-take of the four domestic factors – the BoJ’s policy tweak, residents’ FX hedging, current account improvement, the JPY’s ‘safe haven status’ – we believe would support the JPY suggests that the rationale remains intact, even if some developments may be taking a longer time to materialise.”

“We make some small changes to our quarterly projections for USD/JPY and leave our year-end 2023 forecast unchanged at 120.”

Source: HSBC forecasts