USD/JPY: Yen can become a significant outperformer during the global easing phase – Wells Fargo

Economists at Wells Fargo expect the Yen to be a key beneficiary from US Dollar weakness.

Japanese Yen strength later this year

Against a backdrop of aggressive global monetary tightening, the Yen has underperformed so far in 2023. However, our expectation for the Bank of Japan to adjust its policy settings in Q4-2023 to further normalize the government bond market leads us to believe the Japanese currency has scope to outperform later this year.

Yen strength should also be supported by the end of global central bank tightening cycles and a transition toward global easing, as well as a US recession in the second half of 2023.

We target a USD/JPY exchange rate 136.00 by end 2023, and 129.00 by late 2024.