This is via Bank of America / Merrill Lynch on where they see USD/JPY heading (TL;DR … 115!)

  • Alleviation in trade war risks is also expected to see USD/JPY track US rates higher and we think that the recent speculation around a recalibration of BoJ policy at next week's meeting is premature. In our view, unless the BoJ moves toward policy normalization beyond minor adjustments, we think portfolio and FDI flows likely to remain supportive of higher USD/JPY.
  • Our base case view … is the BoJ taking actions that would send a clearer signal that it will tolerate further steepening in the 10yr+ segment of the curve but either dropping the JPY80trn quantitative "guideline" from the statement and lowering purchase floors for its monthly JGB purchase operations. We see this as minor tweaks and insufficient to lift JPY.
  • The more pervasive driver for JPY weakness comes from the portfolio and FDI channel of the balance of payments. We expect structural M&A outflows and on-going Japanese investor buying of foreign investors to continue therefore weighing on Japan's basic balance.
  • We reiterate our call that USD/JPY will rally towards a 115 peak.