The Japanese yen weakened sharply in March, temporarily reaching the 125 level. Economists at MUFG Bank expect the USD/JPY will meet strong upside resistance at the 125 level in the near-term despite changes in the external environment. 

Possibility of the yen weakening further against the dollar

“We think it will be difficult to break 125 level. The USD/JPY's move to 125 on 28 March was followed by government official scrambling to talk the yen up on the next day.”

“We do not think government action will be able to trigger a clear shift to a stronger yen in the absence of a change in the external environment. We do not expect the USD/JPY to quickly fall below 120. For the time being, we have revised up our forecast range assuming that the USD/JPY will remain around 120-125.”

“We see little prospect that the BoJ will adjust its policy settings, such as by tweaking YCC, at the next policy board meeting on 27-28 April. This is likely to remind the market of the gap between monetary policy in Japan and the US, raising the risk of another sharp bout of yen depreciation. In that case, we expect the USD/JPY would rise back to 125 and test the 5 June 2015 high of 125.86. If it breaks past this level, a move to the highest point since 2002 would come into view. If it passes the 13 June 2002 high of 125.91 we see no clear chart point until the 9 May 2002 high of 129.15, and would even have to consider the possibility of a rise to the 130 level.”