Credit Agricole CIB Research revises down its USD/JPY forecasts.

"The steep selloff in JGBs over the past 18M is encouraging the GPIF to increase the weighting of domestic bonds in its portfolio. This change would also reduce pressure from the government for the Fund to allocate more of its capital domestically.

While we cannot know the new asset reallocations of the GPIF, which could be revealed in early November, we judge the most likely new allocations towards domestic bonds of between 31-35% combined with no increase or a modest increase in domestic equity holdings to 31%. Such reallocations would generate repatriation flows of USD115-138.1bn, resulting in short-term fair value for USD/JPY between 148-150," CACIB notes.

"We are lowering our USD/JPY forecast profile, now expecting the exchange rate to average 156 in Q426 (down from 163) and to continue its downward path to 150 in Q427 (previously 156)," CACIB adds.