USD/JPY surged toward the 125.86 high of 2015. The pair is currently trading around the mid-122s but economists at TD Securities expect USD/JPY to retest 125 or more this quarter.

Yen is not your friend

“Unless the BoJ abandons YCC and embraces a hawkish footing, there is little that Japanese authorities can do to offset a rush to neutral by the Fed. We think there is a non-trivial risk that terminal rates are too low, especially in the US. If these two features remain in play, rate differentials will strategically support USD/JPY. This is a big reason we think 'yentervention' is a losing proposition and is unlikely to be deployed.” 

“We think the pair will remain elevated and biased to re-test 125 or more this quarter. Aiding this pressure is Japan's high commodity import bill, which situates the currency as the worst to deal with the terms of trade shock in the G10. The BoJ has embraced currency weakness (a long-desired goal).”