Bank of America Global Research discusses JPY outlook and now w forecast USD/JPY at 104 for mid-year and 106 for year-end. BofA forecasts EUR/JPY at 122 for year-end.

“As US rates have risen, USD/JPY has responded. Will higher US rates boost USD/JPY as it did in 2013 before QE3 tapering or in 2018 when USD/JPY was supported by higher US rates despite general JPY strength?,” BofA notes.

“We think three factors will limit JPY’s downside in 2021 and increase the risk of a JPY rally in case of a correction in the equity market: • Low FX carry compared to 2013 and 2018 .  • Stretched positioning in risk assets, outpacing the economic cycle • Less unhedged demand for US assets (pension rebalancing complete, lifers focus on hedged bonds),” BofA adds.