BofA shifts yen outlook to neutral, citing structural improvements and potential catalysts for a bullish turn by end-2026.
Bank of America has revised its USD/JPY forecast to 152 for end-2026, down from 157, and upgraded its yen view to neutral from bearish. The adjustment reflects improving structural flows, including narrowing loan-deposit gaps and rising real interest rates in Japan, which may support capital inflows over time.
The bank identified three triggers for a potential bullish yen turn: USD/JPY reaching 160, Japan’s 10-year JGB yield nearing 3%, or Brent crude falling below $90. Recent suspected FX intervention of up to ¥10 trillion, equivalent to $63 billion, suggests authorities are actively defending the currency amid persistent weakness.
While rate differentials between Japan and the U.S. remain a headwind, BofA views structural improvements as sufficient to justify removing its bearish stance. The yen continues to trade near multi-decade lows, but the bank’s neutral outlook signals cautious optimism for a gradual recovery.