USD/JPY forecast to 118 “may look conservative”

Yen forecasts from Scotia (this in brief from a much longer piece):

We expect the JPY to remain under pressure in 2022 primarily because US yields are poised to remain elevated as the Fed dials back asset purchases … and starts to lift the Fed Funds target.

This will contrast with steady BoJ policy over the same time period as the BoJ expects relatively flat economic activity in the near term and CPI holding around zero.

Another JPY-negative consideration is the impact of firm/firmer commodity prices which confer a negative terms of trade effect on the currency.

we have to think that a sustained break above the mid 116s in the next couple of months would make our 118 forecast for this year look conservative. A final point to consider is that a weaker JPY might suit the Japanese authorities as they try to coax prices higher while a stronger USD will help restrain price growth in the US. Stronger USDJPY gains may not encounter the verbal intervention that has curbed sharp JPY moves in the past.

FWIW I think 118 this is year is conservative.

USD/JPY chart, monthly candles:

USD/JPY monthly candle chart

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