OCBC Sees Yen Nearing Turning Point Amid Emerging Policy Support

The Japanese yen is nearing a turning point according to OCBC foreign exchange strategists Sim Moh Siong and Christopher Wong. Despite its cheap valuation, the yen's depreciation pressure has been relentless. However, a rare coordinated intervention by Japanese and U.S. authorities in July may have signaled official concern over excessive weakness.

OCBC believes that domestic policy changes are emerging, which will support the yen's performance. The Bank of Japan appears willing to normalize policy at a faster pace, narrowing the policy gap with other major central banks. This direction is more supportive for the yen, even if the BoJ is unlikely to turn more hawkish than the Federal Reserve in the near term.

OCBC has revised its end-2026 forecast for the USD/JPY to 155 from 160 and expects it to reach 150 by the end of 2027. The bank also sees scope for a shift in Japanese portfolio flows, with the currency standing to benefit if investors make any meaningful move back toward domestic assets.