BoJ Policies Key to Yen's Recovery Prospects
The Japanese Yen's (JPY) recovery case is now heavily dependent on the Bank of Japan's (BoJ) policy decisions, according to MUFG. The US Dollar to Japanese Yen (USD/JPY) exchange rate has been hovering near 159.03, just above MUFG's predicted target of 158 by the end of Q3 2026.
The bank expects the pair to reach 156 by the end of Q4 2026, implying yen gains of approximately 0.6% and 1.9% respectively from current levels. This prediction is based on joint intervention in July and possible BoJ tightening, which has been a turning point for USD/JPY trends in the past.
MUFG's Derek Halpenny noted that US Treasury Secretary Scott Bessent argued that market signals are not enough, and policy must reinforce intervention. This distinction is crucial as the yen has already surrendered part of its post-intervention advance.
The BoJ held its policy rate at 1.00% in July, but speculation about another increase has grown as officials link currency policy more closely with monetary settings. If the BoJ raises rates and US yields soften, MUFG's year-end target of 156 becomes more achievable.