The Ukraine war has led to significant USD strength and thus also to a surge in USD/JPY. Amid a global inflationary supply shock, economists at Commerzbank expect the Japanese yen to move downward.

Real interest rate in Japan to shift to the disadvantage of JPY

“In the event of a global energy price shock, the real interest rate in Japan is likely to shift significantly to the disadvantage of the yen – compared with other currency areas.”

“We assume that the yen will not recover and will tend to moderate weakness if the global inflation shock continues to unfold in H2/2022.”

“The BoJ is unlikely to be satisfied with the recent pace of yen depreciation. However, it is more likely to welcome a moderate pace of depreciation.”