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The USD/JPY pair is forecast to trade at 103 by the end of the fourth quarter and at 101 by the first quarter at CIBC. They point out that Japanese politics did not alter markets. 

Key Quotes: 

“Although the BoJ revised up their assessment of the domestic economy, there remains little expectation any immediate policy change. For now, the central bank assumes that domestic activity will rebound, in part due to accommodative financial conditions. The BoJ also upgraded both its export assessment and industrial output outlook. However, a declining trend in capital investment suggests that any recovery will remain slow and protracted, underlining ongoing policy inertia.”

“The unexpected resignation of PM Abe failed to materially destabilise asset markets.”

“For now, markets are happy to assume that the policy backdrop remains broadly unchanged.”

“With monetary policy on auto-pilot, we expect limited upside pressure on domestic yields. Therefore, if we are to see additional JGB-UST spread compression, key to additional USDJPY downside, it may have to come from the US side of the equation. However, the perpetuation of limited yield pick-up is likely to see Japanese domestic investor flows remain well below year-ago levels amidst potential US election related political uncertainty. Limited yield pick and risk uncertainty point towards ongoing JPY impetus. The BoJ/MoF may only start to become uncomfortable should JPY gains begin to threaten 101.19 year-to-date lows prior to year-end.”