Via MUFG:
With the USD/JPY spot rate close to realising new closing highs the risks are certainly more skewed to the upside. Yen selling could be further reinforced on a break of 117.00 which we believe is an important long-term resistance point technically. As stated here before, yield spreads cannot be relied upon over the timeframe of the impending Fed tightening cycle – that correlation eventually breaks down. But there appears scope for that influence to play a role, perhaps into the first rate increase by the Fed on 16th March.
We are in the final period of the move higher in USD/JPY. Yield spreads will lose their influence given how much is now priced into the US curve while the overall withdrawal of monetary accommodation will result in more challenging financial market conditions that will likely benefit the yen. Our PPP estimates point to USD/JPY overvaluation approaching 20%.
The more elevated risks associated to possible conflict between Russia and Ukraine is the primary risk to USD/JPY advancing further higher from here. The newsflow is fluid and changes rapidly but at the time of writing the pullback of Russian troops from Ukrainian border areas is a positive development. Higher yields more generally globally that cause asset price corrections is the second primary risk to USD/JPY but this risk feels further away than the imminent threat related to Russia.
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Note "PPP" is Purchasing Power Parity - this is a model of exchange rate valuation ... which says that in the long run exchange rates should move towards the rate that would equalise the prices of an identical basket of goods and services (in this case, a burger) in any two countries.
I've posted on this model before, most recently last year in this piece:
More at this Investopedia article.