Economists at Westpac believe that the current level of USD/JPY could be justified. Furthermore, they expect the pair to trade at 123 by the end of 2023.

Recent move in USD/JPY to 132 could prove unsustainable in the near term

“While we suspect the recent move in USD/JPY from almost 140 to 132 could prove unsustainable in the near term, as Japan benefits from Asian growth and the downtrend in energy prices persists, fundamentals will justify the current level of yen by end-2022.”

“Additional gains are then likely in 2023 as US interest rate expectations reprice, narrowing the differential, and as growth in Japan largely keeps pace with the US. By end-2023, we see USD/JPY at 123.”