Key Takeaways
Bank of America Corp. has upgraded its view on the Japanese yen to neutral from bearish, identifying three catalysts that could spark a rally just as the currency re-tests the 160-per-dollar level that previously triggered massive government intervention.
"We are upgrading JPY to neutral from bearish," BofA strategist Shusuke Yamada said in a report, citing improving structural flow dynamics and vulnerabilities in other major currencies for the change.
The bank lowered its end-2026 forecast for the dollar-yen pair to 152 from 157. Yamada’s report outlined three potential triggers for a shift to a bullish stance: a policy response to a USD/JPY cross of 160, a rise in 10-year Japanese government bond yields to 3 percent, or a drop in Brent crude prices below $90 a barrel.
The yen has weakened to around 159 per dollar, its lowest since April 30, putting traders on high alert for another round of intervention after authorities spent an estimated ¥10 trillion ($63 billion) to support the currency in late April and early May.
The yen’s persistent weakness is largely attributed to the wide gap between Japan’s near-zero interest rates and higher yields in the U.S. While the Bank of Japan hiked its key rate to 0.75% in December 2025, the move failed to halt the yen's slide, and the Federal Reserve's own series of rate cuts has been offset by renewed inflation fears stemming from the Middle East conflict.
BofA’s shift is rooted in signs of improvement in Japan’s structural flow dynamics. Yamada noted a narrowing bank loan-to-deposit gap and rising real interest rates as factors that could support the yen, particularly if domestic fiscal concerns begin to fade.
The call highlights a growing debate on Wall Street over whether the yen has been oversold. A reversal could unwind significant carry trades, impacting global capital flows. Investors will now watch the 160 level and Japan’s inflation data for clues on the BOJ's next move, expected at its meeting next month.
This article is for informational purposes only and does not constitute investment advice.
