Despite near-term USD strength pushing USD/JPY toward 160.00, analysts expect a Yen recovery driven by BoJ tightening, improved JGB demand, and the high probability of government intervention.
USD/JPY has been pushed back toward the 159.00-160.00 resistance zone by post-US CPI dollar strength, but strategists at ING and MUFG expect investors to buy the yen aggressively above 160.00, where official intervention becomes a much greater prospect. With the BoJ seen within 1-2 hikes of its neutral rate, medium-term risks skew toward a lower pair, though near-term US dollar momentum could still test 159.00.
The yen slid toward the 160.00 threshold after US CPI data, but ING's Chris Turner and MUFG's Derek Halpenny both see risks skewed toward yen appreciation: solid manufacturing sentiment, firm wage growth, expanding JGB demand and intervention threats above 160.00 support a structural turnaround as the BoJ heads toward its neutral rate.
Confidence in the JGB market has improved, helped by a more active BoJ and expectations it would be at the neutral policy rate within one or two hikes, with possible tax incentives (NISA inclusion, inheritance tax removal) to spur domestic buying. That supports bond demand, while BoJ tightening points to rising domestic yields, leaving the net effect on yields mixed.
The Japanese Yen faces short-term pressure as USD/JPY nears the 160.00 level following recent US CPI data. However, institutional strategists at ING and MUFG anticipate a medium-term structural turnaround, citing the threat of official intervention above 160.00 and the Bank of Japan's proximity to its neutral policy rate.
Strategists at ING and MUFG argue that above 160.00 currency intervention risk rises sharply, and with Japanese inflation stable at 2.00% and the BoJ close to its neutral rate, investors are expected to buy the cheap yen, weakening the pair over the medium term.
The broadly strong US dollar following the US inflation data could easily drive the pair through resistance at 159.00 in the short term.
Yes. ING and MUFG both argue the yen is increasingly attractive at current levels, citing intervention risk above 160.00, rising domestic yields and a Bank of Japan within one or two hikes of its neutral rate.