In the absence of fresh terms of trade shock, and with the help of falling US Treasury yields, the Yen should make substantial gains in 2024. A back-of-the-envelope regression of USD/JPY and the yield gap, coupled with our yield forecasts, point to a return to USD/JPY 130-135 in 2H24. 

Given the Yen’s sensitivity to long-term yields, how much it has fallen relative to the Euro, and how much bad news is ‘in the price’ for the North Asian currencies, EUR/JPY and indeed (in a less scary world) CHF/JPY have considerable room to fall in 2024.