Societe Generale Research discusses the fair-value estimates for USD/JPY.

"The correlations between rate differentials and EUR/JPY simply had the wrong sign. What we know is that the Big Mac Index suggests that [we] could buy a burger in Tokyo for less than half the price we would have to pay in London, and the OECD PPP measure puts fair value for USD/JPY below 100. We are nowhere near fair value but, since the catalyst for these massive mispricings was the explosion in rate differentials after 2020, the fair value that the 2020-2024 correlation between rates and USD/JPY would imply today is 135," SocGen notes.

In order to get USD/JPY down, Japan needs higher rates, but to sustain higher rates, Japan needs brighter growth prospects and, to get those, it surely needs lower oil prices. As a result, we remain sceptical about how far an intervention-led yen rally, even one supported by the US, can go in the absence of stronger Japanese GDP growth to provide credibility for Japan's higher bond yields," SocGen adds.