Rabobank holds yen bull view despite poor run, eyes Hormuz as key risk

What the desk is arguing

Rabobank is holding firm to its forecast for USDJPY to decline by year-end, driven by ongoing structural changes in Japan's economy. The bank's analysis highlights the Strait of Hormuz's reopening as a pivotal factor, suggesting that a resolution within weeks is essential for the yen's potential recovery. Per the full note source, the yen's persistent weakness has been exacerbated by its role as a funding currency in risk-on environments.

The desk underscores that Rabobank's structural Japan thesis is rooted in gradual policy normalization by the Bank of Japan and evolving inflation dynamics. Despite the yen's poor performance this year, the bank's outlook remains optimistic, suggesting that any intervention efforts may merely offer entry points for speculators rather than reversing established trends.

The alternative read would suggest that if the Hormuz closure extends beyond the anticipated timeline, the yen could face prolonged weakness, complicating any bullish narrative for the currency in the near term.

Where it sits in our coverage

Our consensus target for USDJPY stands at 1.075, with a range between 1.04 and 1.12. Notable targets from other firms include: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26) - citi: 1.08 (Mar26)

This view aligns with jpmorgan's target, which sits at the upper end of our consensus range, while bofa presents a more bearish outlook, indicating divergence in market sentiment regarding the yen's trajectory.

How other firms see it

Several firms, including jpmorgan and citi, share a similar bullish outlook on the yen, aligning with Rabobank's structural narrative. Conversely, bofa maintains a more cautious stance, reflecting skepticism about the yen's ability to recover in the near term.

Watch the USD/JPY pair closely, as its movements will likely reflect shifts in sentiment regarding the Bank of Japan's policy direction and the geopolitical landscape surrounding the Strait of Hormuz.

What the calendar says

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