Economists at Barclays Research expect the USDJPY to reverse back to the 130 level over the course of 2023 due to two reasons.
Fed to start cutting rates from September 2023
“In the medium term, we expect USDJPY to reverse its rally back towards 130 in 2023 due to tightening monetary policy divergence and an improving current account.”
“We expect the Fed to start cutting rates from September 2023 after holding its FF target range at 5.00-5.25% for six months, leading to tighter policy rate differentials between the US and Japan. Our baseline assumption is for no changes in BoJ policy until 2024, but the risk may be for an earlier move if domestic wage/inflation dynamics improve, global growth holds up, or fears about the limits of FX intervention arise.”
“The decline in global commodity prices (especially oil and food) and the reopening of Japan’s borders to foreign tourism should start reversing the negative terms of trade shock on the current account in 2022. Limited appetite for FX-unhedged investment as well as subdued outward M&A flows from corporates suggest that FX supply-demand will tilt in favor of the JPY in 2023.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.