Japanese flows outward should ebb over time. Thus, economists at CIBC Capital Markets expect the USD/JPY pair to edge lower.

10-year JGB yields should drift towards 100 bps

Over time, 10-year JGB yields should drift towards 100 bps – which is where they were in the years leading up to Abenomics. This is incredibly important given that Japanese investors have been large net creditors to the rest of the world precisely because domestic yields were low. 

A rise higher in 10-year JGB yields suggests that less capital will be exported outside of the country and supports downside USD/JPY over the projection horizon.