We retain the forecast that April could bring a rate hike from the BoJ. However, this will be very dependent on strong data on wages from the spring ‘Shunto’ talks and on evidence of changing behaviour in firms with respect to wages and pricing.

Our forecast that USD/JPY could end the year at 135.00 assumes that the BoJ will hike rates this year. However, there is room for disappointment on the pace of policy moves and we see potential for USD/JPY to trade back at 148.00 on a one-month view.