What the desk is arguing
The desk supports the notion that the upward revision by UBS on USD/JPY forecasts is indicative of a broader adjustment in market expectations due to external factors like oil prices and domestic monetary policy developments in Japan. This alignment with UBS's caution regarding the Bank of Japan's future actions strengthens the argument for a bullish stance on USD/JPY in the near to medium term.
Furthermore, given the mixed responses from other firms regarding the direction of USD/JPY, UBS's cautious stance might signal a pivotal shift in how policymakers will react to fluctuating global economic inputs. The risk of unexpected moves from the BoJ further complicates the outlook for JPY, which could reinforce sentiment toward USD bullishness.
Where it sits in our coverage
Our current consensus target for USD/JPY stands at 147.50, which appears conservative compared to UBS's revised forecasts. The median predictions from various banks show a range with JPMorgan forecasting much higher at 164.00 for Dec-26, suggesting a significant spread and divergence from the consensus outlook.
How other firms see it
The market shows a mixed set of views, with several firms aligned on a more bullish phase for USD/JPY, while some maintain a more cautious outlook. For instance, JPMorgan and Goldman Sachs present higher targets, reflecting optimism in USD's strength, whereas firms like Morgan Stanley suggest a downward adjustment over time.