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Economists at MUFG Bank maintain a view of gradual JPY appreciation. That is likely to play out gradually over the coming months given the clear reality – the global COVID-19 crisis has altered the outlook for the yen and reinforced the prospect of appreciation going forward. 

Key quotes

“The best we expect an incoming Suga administration can do is to avoid substantial JPY outperformance by stressing the fact that the policies of maintaining yen weakness will remain in place. Unfortunately, the macro backdrop created by COVID-19 means that even if PM Abe had remained in office, the case for the yen remaining as weak as it has is becoming less compelling.” 

“The USD/JPY lows from August (105.20 on 28 August and 105.10 on 19 August) are now in sight and look set to be breached which will give this move lower in USD/JPY some added short-term momentum.”