USD/JPY has continued its upward trajectory above 145. Economists at Danske Bank analyze the pair’s outlook.

USD/JPY seems fundamentally overvalued

We think the USD/JPY seems fundamentally overvalued and combined with potential monetary policy tightening; we expect the cross to drop to around 130 on a 6-12M horizon. 

We think the BoJ still is underestimating inflationary pressures in Japan, and the persistence of underlying inflation will continue to build pressure on BoJ’s ultra-dovish stance