Morgan Stanley forecasts USD/JPY to fall to 140 - Investing.com

What the desk is arguing

Morgan Stanley forecasts USD/JPY to fall to 140 by December 2026, the most bearish call among major banks. The thesis rests on the Bank of Japan accelerating its rate normalization cycle, potentially hiking rates by 100-150bp over the next 18 months. This would sharply narrow the US-Japan yield spread, putting sustained downward pressure on the pair.

Supporting evidence includes Japan's rising core inflation and wage growth, which strengthen the case for BoJ action. Morgan Stanley also points to an improving current account surplus as a structural driver of yen appreciation. The firm implicitly rejects the view that US rates will remain high enough to keep USD/JPY elevated.

Where it sits in our coverage

Our consensus median for USD/JPY at December 2026 stands at 147.50, with a wide range of 140 to 164 across firms. Morgan Stanley's 140 target is at the very bottom of that range, 7.5 figures below consensus. This means the desk is taking a distinctly contrarian stance relative to the aggregate view.

Among specific firms: - Morgan Stanley: Dec-26 target 140 (most bearish) - JPMorgan: Dec-26 target 164 (most bullish) - Deutsche Bank: Dec-26 target 143 (closely aligned with Morgan Stanley) - Goldman Sachs: Dec-26 target 148 (close to consensus median)

Morgan Stanley's view is shared by Deutsche Bank (143) but stands in stark contrast to JPMorgan's 164, illustrating the extreme dispersion in USD/JPY forecasts.

How other firms see it

Most firms align with a gradual yen appreciation but are less aggressive than Morgan Stanley. Deutsche Bank at 143 is the closest peer, while MUFG (146) and BofA (147) are also bearish but more moderate. Goldman Sachs (148) and ING (152) sit near consensus, reflecting a slower depreciation path.

On the contrary side, JPMorgan stands out with a Dec-26 target of 164, implying further yen weakness. Other firms like Barclays (149) are near consensus but still above Morgan Stanley. The 24-figure spread between the most bullish and bearish forecasts highlights exceptional uncertainty around the BoJ's policy trajectory.