UBS Raises USD/JPY Forecast: Oil Prices And BoJ Caution Trigger Yen Weakness - Bitcoin World

What the desk is arguing

UBS has raised its USD/JPY forecast, arguing that higher oil prices and the Bank of Japan's cautious stance are driving renewed yen weakness. The move suggests that the positive carry and safe-haven demand for the dollar continue to outweigh the BoJ's gradual normalization path.

This thesis is supported by the recent price action in oil, which pressures Japan's import costs and trade balance. Additionally, the BoJ's reluctance to telegraph aggressive rate hikes provides little resistance to dollar/yen upside.

Where it sits in our coverage

Our internal consensus for USD/JPY stands at 154.50 for Mar26, 151.50 for Jun26, and 147.50 for Dec26, implying gradual yen appreciation. The UBS upgrade is more aligned with the bearish yen camp, such as JPMorgan (Mar26 157.00, Dec26 164.00) and Barclays (Mar26 155.00, Dec26 149.00), which see a weaker yen. The median consensus, however, points to yen strength, reflecting a significant divergence.

Key firm targets for Dec26 highlight the dispersion: - JPMorgan: 164.00 - Barclays: 149.00 - Morgan Stanley: 140.00

How other firms see it

Barclays and JPMorgan are aligned with UBS's bearish yen view, forecasting a weaker JPY over the medium term. JPMorgan's Dec26 target of 164.00 is the most extreme, implying sustained dollar strength.

On the contrary, Morgan Stanley (Dec26 140.00) and Deutsche Bank (Dec26 143.00) are the most bullish on the yen, predicting sharp appreciation. This split reflects differing views on the BoJ's ability to normalize policy amid global headwinds.