Last week, USD/JPY moved lower and reached 97. The following reasons explain why. For a start, during the week markets became concerned about a jump in the Chinese money market rate, which led to safe haven flows into the Yen. But perhaps more importantly, after the weaker-than-expected September nonfarm payrolls report we saw an environment of general USD weakness. Indeed, the weak report has prompted us to shift our expectation of the Fed’s first tapering move from December to March. As a result we have adjusted our USD forecast, reflecting a slower appreciation path for the dollar, also versus the JPY. Our new year-end forecast of USD/JPY is now 100, but we have kept our year-end forecast for 2014 at 110 driven by our general bullish USD view. We still believe that the BoJ will need to step up its monetary easing in 2014 to reach its inflation target. This is because inflation has mostly been driven by higher energy prices on the back of JPY weakness. But as this wave of JPY weakness has come to a halt, so will its effect on inflation, suggesting that further declines in JPY are needed in order for the BoJ to reach its inflation target.