Further yen depreciation unlikely

The JPY appears to be caught between two powerful and opposing forces. On one side, the BoJ's QQE program and portfolio outflows by Japanese investors; on the other, JPY'sextraordinary cheapness, which is attracting substantial foreign investment. 

Between these forces, we expect USD/JPY to continue to range trade around 123, with risks on both sides.

While across-the-board USD rally into the Fed liftoff and potential further BoJ easing may exert upward pressure, deterioration in risk sentiment poses downside risk for the pair.