MUFG Research sees a scope for USD/JPY to continue heading lower towards 123 by year-end.
"US dollar overvaluation was most obvious versus the yen and that started to reverse abruptly in Q4. We see that continuing this year given the negative terms of trade shock will not be repeated this year and global inflation is subsiding resulting in the Fed pausing. This will contrast with the BoJ, which under new leadership from April, is set to normalise its ultra-loose monetary stance further," MUFG notes.
"In any case, the yen remains undervalued despite the 20 big figure drop in USD/JPY and we see no reason for the move to reverse much with a steady move lower toward the 120-level this year very likely," MUFG adds.