The BoJ, yen and Trump’s tariff announcement

What the desk is arguing

The MUFG commentary suggests that the upcoming tariff rates from President Trump could have significant ramifications for the FX markets, particularly in how the yen is valued. With inflation in Japan showing unexpected increases, there is a burgeoning fear that the Bank of Japan may lag in its monetary policy adjustments, potentially necessitating a rate hike sooner than previously anticipated.

Moreover, the discussion underscores that should the BoJ respond with an aggressive rate change, it may alter the current landscape for the yen, catalyzing shifts in investment flows. The implicit argument being rejected is that the BoJ will continue its status quo despite the pressing inflationary pressures, which could lead to further depreciation of the yen if swift action is not taken.

Where it sits in our coverage

Currently, our consensus target for USD/JPY is set at 1.075, with a firm spread reflecting an alignment with other major analysts. This prediction presents a moderately bullish outlook on the yen, contrasting with MUFG's analysis that hints at potential volatility depending on Trump's tariff announcement and its impact on Japan's economic trajectory.

In light of our coverage, the following firms have provided specific targets:

• Barclays: 1.08, Mar-26
• JPMorgan: 1.10, Mar-26
• Goldman Sachs: 1.07, Mar-26

How other firms see it

Some firms are aligned with MUFG's perspective regarding the potential for yen volatility in the wake of fiscal announcements. Specifically, Goldman Sachs and JPMorgan have predicted a stronger yen against the backdrop of potential BoJ policy changes.

Conversely, BofA has adopted a more cautious approach, suggesting that tariff updates may not have a significant immediate impact on the yen's valuation, maintaining a more pessimistic 1.04 target for March.