Economists at ING expect steady outperformance of the Yen through the year and forecast USD/JPY at 128 by the end of June.

The Bank of Japan can add to the Yen’s appeal

“A lower USD/JPY is becoming the market’s conviction call. It covers both the potential for a sharp Fed easing cycle and frailty in the US financial system. Also, there is the wild card risk event of a change in BoJ policy. 

“At the 16 June meeting, we think the BoJ could shorten its yield curve target to 5-year from 10-year JGB yields. 10-year JGB yields would rise sharply, and the Yen would rally. That’s why we target 128 for USD/JPY in end-June.”

“One risk we see to the bearish USD/JPY call is energy prices. Our team is calling Brent to $110/bbl by year-end – a Yen negative.”