The Japanese Yen plunged to the 131 level after the BoJ’s decision to leave its policy tools unchanged. Economists at ING expect the USD/JPY rcovery to stall at 132.50/133 and see the pair with chances to trade at 120 by year-end.

A volatile bear trend

“USD/JPY remains priced as one of the most volatile currencies in the G10 FX space and notably delivers on those expectations of volatility. One week realised volatility is being delivered at 20% versus the priced levels of 19%. We expect that volatility to continue, especially in the March/April window when Governor Kuroda will hand over the reins of the BoJ governing board.”

“We expect further broad Dollar weakness this year as Federal Reserve easing expectations build in the second quarter. This should probably mean the current USD/JPY correction stalls in the 132.50/133.00 area, with outside risk to 135.”

“We have an end 1Q23 target of 128 and our current year-end target of 125 should probably be closer to 120.”