Wells Fargo economists expect the Japanese yen to remain on the defensive. However, the USD/JPY pair will decline again towards 146 by the end of 2024.
Yield spreads should favor the Yen in the long term
Dollar weakness may trigger a longer-term recovery in many of the currencies for which we expect a short-term decline, although we also believe that the Japanese yen may recover more than most over time.
For some time now, rising US Treasury yields, a hawkish Fed and an accommodative Bank of Japan have weighed on the Japanese yen. Should the Fed cut interest rates, as we expect, and even if the Bank of Japan continues to tighten its monetary policy very gradually, yield differentials should favor the Japanese yen in the long term. As this dynamic plays out, we expect USD/JPY to approach 146.00 by the end of next year.
Source: Fx Street
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