Economists at HSBC believe USD/JPY will fall by the end of 2023 based on a range of factors from future BoJ policy announcements to an improvement in Japan’s balance of payments and a revival of the JPY’s “safe haven” status.
A revival of the yen’s “safe haven” status could weigh on USD/JPY
“There are many upcoming events that could lead to a change in BoJ policy later. Prime Minister Kishida is likely to nominate the next BoJ governor sometime in February. Governor Kuroda will chair its last monetary policy meeting on March 10. The first table of Shunto (annual wage negotiations) results is likely to be announced around mid-March. The new governor will chair his first monetary policy meeting on April 28.
“Besides the BoJ, there are other likely events that could push USD/JPY lower in 2023: resident investors hedging their foreign investments; an improvement in Japan’s core balance of payments due to the undervaluation of the JPY and the recovery of tourism; and the resurgence of the JPY’s countercyclical nature and “safe haven” status during risk episodes (as US yields fall).