Forecast for JPY (Japanese yen) in 2022; JPY performance against main currencies

This article looks at the trend in the JPY (Japanese Yen) forecast in 2022.

2021 US dollar USD Forecast

Bank forecasts for the JPY in 2022

  • The Japanese yen was the worst performing currency for most of 2021, as the global recovery from COVID got underway. 
  • Analysts agree that the Japanese yen could continue to fall in the coming year should confidence in the global economic outlook stay high.
  • The Canadian Imperial Bank of Commerce expects the Japanese yen to fall as the Japanese central bank, BoJ, keeps interest rates low and continues supporting the economy.
  • ING doesn't expect inflation in Japan to rise to 1% until 2023, so Japan is unlikely to see an interest rate increase for some time yet.
  • Meanwhile HSBC also sees the yen falling as interest rates in Japan are not expected to rise.

Check today's Japanese Yen exchange rate.

2021 US dollar USD forecast Image of Golden Gate Bridge

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What’s the impact of a weak Japanese Yen (JPY)?

  • Japan has an export focused economy. A weak Japanese yen gives Japanese exporters a competitive advantage by making Japanese products cheaper for overseas buyers. This boosts the demand for Japanese goods and services abroad and supports economic growth in Japan.
  • Overseas countries which import products or goods from Japan benefit from the cheaper prices. However, oversea exporters suffer from the increasingly competitive prices of Japanese products..
  • A weak yen makes imports more expensive and reduces the buying power of Japanese consumers

What’s the impact of a strong Japanese Yen (JPY)?

  • A strong yen is not good news for Japan because it is so dependent on exports,
  • A strong yen would make Japanese products and services less competitive abroad and would probably result in lower demand. This would be bad news for the Japanese economy, hurting the business of many exporters.
  • Japan’s major trading partner countries for exports include, US, Chima, Korea
  • A strong Japanese yen would mean that imports are cheaper. Consumers would be able to buy more imported goods and services. Which would be positive for countries that export to Japan and could see demand for those goods rise. 
  • Japan’s major trading partners for imports are China, US, Korea, Australia and Saudi Arabia.

What are the key influences on JPY forecasts in 2022?

  • The Japanese yen has the status of a safe haven currency. This means that when there is economic uncertainty, investors look to buy Japanese yen. 
  • Should COVID uncertainties rise, the Japanese yen could also rise.
  • In addition to global factors, local politics and economic growth also play an important role in influencing the value of the Japanese yen . 

1. The Economy

  • According to the OECD, the Japanese economy is expected to grow by 1.8% hurt by multi-state emergency COVID restrictions in 2021.
  • The economy is expected to grow 3.4% in 2022 as the reopening of the economy and supportive policies lead to a bounce back.
  • However, ongoing supply chain disruptions could continue to hurt exports in the early part of 2022.
2021 US dollar forecast

 

2. Politics

  • Politics have had an important influence on the yen. When the elected government imposes policies to help improve the economy, the yen often rises.
  • Japan received three important spending packages in 2021 to counter the impact from the pandemic.
  • Japanese authorities are likely to continue to implement policies which help keep the Japanese yen relatively stable and not too strong. A strong Japanese yen would not be beneficial for Japan, which is a big exporter.

3. Other currencies

  • The US Dollar can influence the value of the Japanese yen. Generally speaking, when the value of the US Dollar rises, the value of the yen falls,
  • The Japanese yen often trades inversely to riskier currencies such as the Australian dollar or the New Zealand dollar because of its safe haven status.

JPY/USD performance in 2022

  • ING predicts that the Japanese yen will weaken against the US Dollar. ING forecasts that USD/JPY will rise to 1.20 by the end of 2022.
  • Citibank also believes that the Japanese yen will fall against the USD, but to a lesser degree. They see USD/JPY rising to 114 by the end of 2022.
  • CIBC sees USD/JPY  rising to 116 by mid 2022, before falling again to 114 by the end of 2022.
  •  The National Australia Bank is more positive surrounding the outlook for the yen, predicting that USD/JPY will fall to 109 by the end of 2022.

JPY/NZD performance in 2022

  • The New Zealand Dollar could rise against the Japanese yen if the central bank, the Reserve Bank of New Zealand, hike interest rates. Interest rates a expected to rise several times across 2022 which could lift the New Zealand Dollar.
  • Meanwhile, interest rates are not expected to rise in Japan. This difference in interest rate ex;pectations is favorable for the New Zealand Dollar.
  • If concerns surrounding the new COVID variant rise then the safe haven Japanese yen could rise against the riskier New Zealand Dollar.

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JPY against other currencies

  • How the Japanese yen performs against the Pound depends on whether the UK economic recovery continues to gain pace or whether Omicron or any other new COVID strain stalls the recovery.  
  • A continued strong recovery in the UK could lift the Pound.
  • However, if fears rise investors could flock to the safe haven yen.
  • India’s economic recovery accelerated across the second half of 2021. However with only around 35% on the population vaccinated against COVID the economic recovery could be derailed if COVID risks rise again.
  • The Indian economy is expected to rise by a solid 8.5% in 2022 but the central bank is showing no clues that it will raise interest rates, which could keep Rupee strength limited.
  • The Japanese yen could hold relatively steady against the Euro across the year as long as the market mood remains stable.
  • Neither Japan nor Europe are expected to raise interest rates in 2022.

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By Ileana Ionescu Updated December 23rd, 2021