March 2023 will be especially volatile for USDJPY. Economists at ING believe that the pair could be trading at 130 by the end of next year.
1Q23 will be a crucial quarter
“The default view is that the perma-dovish BoJ Governor, Haruhiko Kuroda, will not be moved. However, the end of Governor Kuroda’s term on 8 April 2023 will no doubt lead to frenzied speculation on his replacement and whether a less dovish candidate emerges”
“The first quarter of 2023 will see huge focus on the Japanese wage round, where a rise in wages is a prerequisite for the BoJ to tighten policy. This period will also see the Fed release its dot plots (22 March), which may be the first real chance for the Fed to acknowledge a turn in the inflation profile. As such, this period (March/April) could see a big reversal lower in USDJPY.”
“Unless we end up with 6%+ policy rates in the US next year, we would expect USDJPY to be ending 2023 nearer 130.”