J.P. Morgan Defies Market Expectations with USD/JPY Forecast

Market expectations of faster tightening by the Bank of Japan (BoJ) have led to increased speculation about the yen's strength, but J.P. Morgan contradicts this assumption.

The US Dollar to Yen (USD/JPY) exchange rate has recovered from its recent intervention-driven plunge and is now trading at 159.32, well above its July lows.

However, despite expectations of a September BoJ hike, the yen has not strengthened as expected. J.P. Morgan argues that faster tightening matters less than conventional rates arguments suggest.

The bank's economists have revised their tightening profile and now expect the BoJ policy rate to reach 2.00% by the end of 2027, but this has had little impact on their USD/JPY forecast.

J.P. Morgan keeps its year-end target unchanged at 164, which would take the Dollar-Yen exchange rate back towards July highs and represents a markedly weaker JPY than current levels.