Craig Chan, Nomura’s head of global FX strategy, said that in the event of a change in the monetary policy parameters of the Bank of Japan, the Japanese yen could rise significantly against the US dollar by the end of 2023. USD/JPY is currently trading at 133.02, with a decrease of 0.07%.
According to Nomura forecasts, the USD/JPY will fall to 125 by the end of June and reach 120 by the end of the year. This forecast is based on the opinion that the Fed is at the end of the monetary policy tightening cycle, while the Bank of Japan is likely to reconsider its position on the bond yield curve control program.
At the beginning of the week, the new head of the Bank of Japan Kazuo Ueda said that negative interest rates and yield curve control remain appropriate in the current economic conditions. Under Japan’s yield curve control policy, short-term interest rates are kept at -0.1%, and the 10-year government bond yield at 0.5% above or below zero.
Although it is very difficult to assess what changes the Bank of Japan will make and when they may occur, Chan said that "the probability increases as we continue to move along this year." Meanwhile, he added that a complete abandonment of the yield curve control policy is completely unrealistic at the moment. As for when a potential adjustment might occur, Chan predicted it could happen as early as late April or June.