Is the era of the Japanese Yen's sharp depreciation not over yet? JPMorgan sees the Yen falling to 164

The recent rate hike by the Bank of Japan failed to sustain the strengthening of the yen, leading to increasing bearish voices on the yen. Strategists from companies such as JPMorgan Chase and BNP Paribas believe that, influenced by the US-Japan yield gap and capital outflows, the USD/JPY exchange rate will depreciate to 160 or lower by the end of 2026.

BOJ raises rates to 30-year high, yen does not appreciate

The Bank of Japan (BOJ) raised interest rates by one basis point to 0.75% on 12/19, the highest level in thirty years. The yen did not surge as expected, which further strengthened the view that the yen’s structural weaknesses cannot be quickly resolved.

(BOJ raises rates by one basis point, yen depreciation outpaces Bitcoin rally, is this the end of the bearish trend?)

USD/JPY exchange rate (USDJPY) has risen for four consecutive years. The market initially expected that BOJ rate hikes and Fed rate cuts would lead to a yen rebound, but the results have been disappointing. In April this year, USD/JPY briefly fell below 140 yen, but due to uncertainties surrounding US President Trump’s tariff policies and rising fiscal risks from political changes in Japan, USD/JPY has been climbing and is currently fluctuating around 156, not far from the year’s high of 158.87 reached in January.

JPMorgan sees yen depreciating to 164

Analysts from JPMorgan, BNP Paribas, and other institutions believe that, due to the still-large US-Japan yield gap, negative real interest rates, and ongoing capital outflows, the USD/JPY exchange rate will reach above 160 by the end of 2026. They state that as long as the BOJ gradually tightens monetary policy and inflation risks triggered by fiscal stimulus persist, this trend may continue.

JPMorgan’s chief Japanese FX analyst Junya Tanase also said, “The fundamentals of the yen are quite weak, and this situation is unlikely to change much next year.” Tanase’s forecast for the USD/JPY rate by the end of 2026 is the most pessimistic, expecting it to fall to 164.

Currently, the market expects the BOJ to raise rates again only by September next year. Other factors, including the favorable macroeconomic environment globally for arbitrage strategies and the potential continued outward investments by Japan, also exert pressure on the yen.

Goldman Sachs sees yen appreciation, government intervention as a focus

Nevertheless, some yen observers remain confident that, as the BOJ continues to normalize monetary policy, the yen will appreciate in the long term. Goldman Sachs believes that the yen will eventually strengthen to 1 USD = 100 JPY over the next decade, but also admits that there are many unfavorable factors in the short term.

Since the USD/JPY exchange rate is approaching levels that previously triggered government intervention, the risk of official intervention has once again become a focus. Japanese officials, including Finance Minister Shunichi Suzuki, have intensified warnings against what they call excessively speculative foreign exchange trading. However, analysts say that relying solely on government intervention is unlikely to lift the yen out of its slump.

This article, “Is the era of yen depreciation not over yet? JPMorgan sees yen falling to 164,” first appeared on Chain News ABMedia.