UBS raises USD/JPY forecasts on oil prices and BoJ caution - Investing.com Australia

What the desk is arguing

UBS has raised its USD/JPY forecasts, arguing that higher oil prices will keep US inflation elevated and delay Fed easing, while the Bank of Japan remains hesitant to normalize policy aggressively. This combination supports a stronger dollar versus the yen.

The desk sees limited scope for yen appreciation near term, as Japan's energy import costs rise with oil and the BoJ maintains a cautious stance. UBS implicitly rejects the consensus view that the yen will strengthen to 147-150 by end-2026.

Where it sits in our coverage

Our internal consensus for USD/JPY stands at 147.50 for December 2026, with a firm-level spread from 140 to 164—a significant 24-figure range. UBS's bullish dollar view diverges from the median, which expects yen gains.

Specific firm targets for Dec26 highlight the divergence: - JPMorgan: 164 - Goldman Sachs: 148 - Morgan Stanley: 140 - Barclays: 149

JPMorgan aligns with UBS's dollar-bullish stance, while Morgan Stanley is the most bearish on USD/JPY.

How other firms see it

Among the banks in our coverage, JPMorgan stands out as aligned with UBS, forecasting USD/JPY at 164 for December 2026—well above consensus. This is the most extreme dollar-bullish call.

In contrast, the majority of firms see yen strength: - Morgan Stanley: 140 - Deutsche Bank: 143 - MUFG: 146 - BofA: 147 - Goldman Sachs: 148 - Barclays: 149 - ING: 152

Notably, Goldman Sachs and Barclays are close to consensus, while Morgan Stanley and Deutsche Bank are the most contrary, targeting significant yen appreciation.