This report examines the evolution of the USD/JPY price formation mechanism, finding that while current pricing is not significantly distorted, correlations with interest rate spreads and equities have shifted since 2022. Analysts maintain a long-term ceiling of ¥160/$ and expect a correction to below ¥155/$ by year-end.
Key Takeaways
- 1.The USD/JPY exchange rate shows no marked distortion in current market pricing based on the bank's two-tiered model.
- 2.Japanese authorities' intervention remains necessary to mitigate short-term JPY weakness despite BoJ policy normalization.
- 3.The price formation mechanism for USD/JPY has evolved since 2022, with increased sensitivity to nominal interest rate spreads.
Table of Contents
- Citi's Take
- 2022 shock
- Causal relationships between USDJPY and Japanese equities
- Impact on two-tiered model
- Price formation since 2023
- Change in price formation mechanism
Document Preview
Access the Full Report
Get unlimited access to institutional research reports with a 14-day free trial.
Authors
Osamu TakashimaDaniel TobonBrian Levine
Securities
USDJPYTPX
Themes
FX Price FormationCentral Bank PolicyCurrency Intervention
Regions
Asia PacificJapanUnited States