USD/JPY forecast to 145

We had a big downdraft in USD/JPY and yen crosses more generally yesterday with a number of factors in play. I mentioned in the wrap:

• Wage data from Japan

• former Bank of Japan executive Hideo Hayakawa Bank of Japan saying rates are going to move higher than the market expects,
• Bank of Japan Policy Head Kazuhiro Masaki indicated further rate hikes as underlying inflation accelerated towards the Bank’s 2% goal,
• economy minister Akazawa spoke of further efforts to boost wages and eliminate Japan’s deflationary mindset.

Link for more on these:

• Japan headline wages +4.8% y/y in December, real wages rise also

• BoJ likely to raise ratees higher than most expects says former official Hideo Hayakawa

• Japan: robust wage growth bolsters case for Bank of Japan rate hikes – as early as May

• BOJ official: BOJ sees underlying inflation gradually heading towards 2%

• Japan’s Akazawa says ambitious goal to boost minimum wage, eradicate deflationary mindset

A note from Rabobank says:

• The market consensus that the BoJ will hike interest rates again this year at an extremely modest pace is being tested

Yes, the modest pace looks like it will turn more rapid. May is firming for another BoJ rate hike.

Rabobank’s USD/JPY forecast is 145.00.

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ps. We get a BoJ speaker today:

• Yen traders note – BoJ hawk Naoki Tamura is scheduled to speak on Thursday

• Bank of Japan Board Member, Tamura Naoki at a meeting with local leaders in Nagano at 9.30 am Tokyo time:

• 0030 GMT / 2030 US Eastern time

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USD/JPY update:

Something I didn’t mention yesterday is the potential for JPY to play a ‘safe haven’ role as Trump tariffs and China retaliation escalates. The USD has been a tariff play, that may diminish a little in favour of the yen.

This article was written by Eamonn Sheridan at www.forexlive.com.