Generalised firming of USD likely to push USD/JPY higher over coming months

As widely anticipated now, if there would a beginning in the Fed's hiking cycle in its upcoming meeting in December, there would be a generalized firming in the dollar, which might simultaneously push USD/JPY higher in the months to come.

Extent of any rise will partially depend on whether the Bank of Japan follow ECB's off-late lead and cuts its depo rate, into negative zone or makes an acceleration in its QE.

The possibility of further substantial policy stimulus could see USD/JPY break decisively above 130. Recent comments, however, suggest that the BoJ is reluctant to ease policy further,  partially on concerns that negative rates/more bond purchases could seriously impact market liquidity. 

"Over the coming months, we expect USD/JPY to move up towards the 130 area, but expect the yen to find some support thereafter. We target 125 by end 2016 and 115 by end 2017", estimates Lloyds Bank.