JPY: JPM See Likelihood of Further JPY Outperformance as Limited

JPMorgan write that they expect 65% of JPY shorts to have already been covered and, as such, the potential for sustained JPY outperformance is low, and the upside for JPY from here is likely limited.

• They add that based on the year-to-date correlation between Jan’25 FF futures and USD/JPY, the USD/JPY level consistent with their Fed policy cycle views of 125bps rate cuts this year is Y148.00. When incorporating their Fed and BoJ policy views for this year (Fed 125bps rate cuts and BOJ 25bps rate hikes) is Y144.00.
• Over the longer term, they expect the BOJ to raise its policy rate to 1.5% by mid-2026 and see rates being at neutral levels of Y138-140.00.