A Fundamental Shift Makes Reversal Unlikely Even If Risk Appetite Recovers N-Term #USDJPY

MUFG Research discusses the USD/JPY outlook and argues that upside risks are diminishing even if risk appetite recovers over the near-term.
"The circumstances for the Yen are changing and after recent strong gains for the yen, we see reduced risks of a reversal weaker – even if risk appetite improves and equity markets continue to recover.
The extent of recovery in risk appetite is, of course, more questionable given the increased uncertainty and our view now is that we should not hold out too much hope for any dramatic easing of trade tensions at the upcoming G20 summit in Japan. Status quo is perhaps the best we can hope for. So risk appetite is likely to remain fragile, which will clearly be supportive of the yen. ," MUFG notes. 
" The drop in the 10-year real yield is not linked to risk appetite – the rebound in US equities between January and May did not lift real yields. There is a fundamental shift in growth expectations and that is set to limit the extent of USD/JPY rebound even if risk appetite recovers over the near-term," MUFG adds.