Citi Forecasts Yen Strength on Reduced Japanese Overseas Investment

Citi analysts forecast that the Japanese yen will strengthen against the US dollar through the end of 2027 due to reduced overseas investment by Japanese institutions.

Japan holds the third-largest net foreign assets globally, exceeding ¥1,900 trillion. In 2022, Japanese investors executed their largest-ever repatriation of foreign assets, with outstanding holdings recovering gradually since then.

Retail investors have driven recent growth in overseas investments through NISA accounts, but institutional investors are reducing foreign investments due to rising Japanese interest rates.

Citi expects the yen to reach a long-term ceiling in the ¥160 to ¥165 range and projects the pair will decline to around ¥155 by the end of this year and to approximately ¥145 by the end of next year.