Natixis: Yen’s Steady Decline Heaping Pressure On BoJ, Still Look For Lower USD/JPY By Year End

Natixis write “the yen’s weakness is largely explained by the divergence in monetary policy between the BoJ and Fed, and in particular by the recent rise in U.S. 10-year long rates to a new high of 4.86%.

• “Given our scenario of lower U.S. long rates at the end of the year (the view being that the U.S. economy will be in recession in Q4), we expect the USD/JPY to pull back towards Y144, then Y132 in a year's time, particularly if the BoJ continues to tweak its monetary policy.”
• “On the other hand, were the yen to continue to weaken and the USD/JPY to break above Y150, this could prompt the BoJ to normalise its monetary policy more quickly than expected, pushing up Japanese and global long rates and triggering a technical rebound for the yen.”