USD/JPY range to shift higher

In light of the acceleration of the US economy and rise in short-term yields, the possible downward revision of the BoJ's bullish price outlook down the road, and the BoJ's asymmetrical stance on policy responses, a gradually higher USD/JPY trajectory is continued to be seen. 

"The range is likely to transition into USD/JPY125-130 into 1H16 as we forecast USD/JPY to rise to 125 by year-end and beyond in 1H16", says RBC Capital Markets.

The first risk is that the Abe administration's support rate falls further and the administration gives up on the security issue. The second risk is the Abe administration's support rate continuing to fall, to well below the danger zone of 30%. 

"If such risks emerge, the Abe administration collapsing would no longer be merely a tail risk, and the markets would price this in as weaker share prices and a stronger JPY", added RBC capital markets.