Yen Bearishness Endures Despite Foreign Investment Gains

Bearish sentiment towards the Japanese yen remains strong due to investor concerns over fiscal risks under Prime Minister Sanae Takaichi and perceptions that the Bank of Japan is behind the inflation curve.

The BofA Global Research report suggests that structural selling pressure has been offset by foreign investment into Japan and demand linked to artificial intelligence exports since the second half of 2025.

Currency hedging by overseas investors as Japanese equities rose may have contributed to yen weakness, according to the report. However, coordinated intervention by Japan and the U.S. could challenge the market's bearish view.