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Foreign exchange strategists at Citibank - the world's largest dealer of foreign exchange - are forecasting a stronger Yen over the coming months.

In a briefing to clients of their Wealth Management unit, Citibank say their medium-term call for Yen strength, "remains unchanged. We expect a new economic stimulus package to add about 0.3% to GDP growth in 2020."

Economists at the Wall Street-based lender say the Bank of Japan will not be "leading the charge in a dovish direction by G10 Central Banks."

Rather, any further BoJ easing will be a response to policy changes at the European Central Bank and U.S. Federal Reserve.

Currencies tend to fall when their issuing central bank cuts interest rates, and rise when their central bank is either raising interest rates, or doing nothing at all.

The Bank of Japan is therefore likely to aid Yen strength if it stands still while other central banks are cutting, and Citibank expect authorities to only take action in the event that it sees action to be necessary in order to curb Japanese Yen strength.

The view at Citibank is also seen at MUFG, the Japanese lender, who are expecting the Bank of Japan to maintain a steady approach to interest rates for the foreseeable future, a stance that could ultimately support the currency. But, a rise in value in the Yen would likely trigger further easing.

"The BoJ is also likely to be reactionary rather than proactive and would move to halt yen appreciation – so we’d expect to see USD/JPY a lot closer to 100.00 before the BoJ took further steps," says Fritz Louw, Currency Analyst at MUFG Bank Ltd.

However, it is not just Bank of Japan policy that is being tipped to weigh on the Yen going forward, with the all-important difference in the yield delivered by Japanese government bonds compared to the yield offered by U.S. treasury bonds expected to contribute to changes in the value of the Yen.

"A continuing drop in UST-JGB yield differentials would likely point to still lower USD/JPY over time and even current levels seem to point to a move back to USD/JPY 100 or lower," add Citi.

Citi are currently holding a 6-12 month forecast on USD/JPY of 104, the exchange rate is currently quoted at 109.23.

However, the GBP/JPY is forecast at 142.55 in 6-12 months, up from the current Pound-to-Yen exchange rate at 140.73. This cross-rate forecast is based on Citibank's USD/JPY forecast and their GBP/USD forecast of 1.37 for the given period.

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