US, Japan both believe forex volatility is undesirable - Bessent

What the desk is arguing

The desk frames this as a cautious yet optimistic view on USD/JPY, emphasizing that both nations recognize the detrimental effects of forex volatility. The commentary suggests that Japan's robust economic fundamentals will eventually be reflected in a stronger yen, although this may take time.

Supporting this view, the Bank of Japan (BOJ) under Governor Ueda is seen as capable of guiding monetary policy effectively, which could stabilize the yen. However, the lack of commitment from the US for joint intervention indicates that any corrective measures may be limited.

The alternative read would be that without US support for intervention, the yen could continue to face downward pressure, especially if global market conditions remain unfavorable.

Where it sits in our coverage

Our consensus target for USD/JPY is 1.075, with a range from 1.04 to 1.12. Notable firm targets include: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26) - citi: 1.12 (Mar26)

This view aligns with jpmorgan's target, which is at the upper end of the consensus range, suggesting a more bullish outlook on the yen compared to bofa's more pessimistic stance.

How other firms see it

Firms like citi and jpmorgan are aligned in their belief that the yen will strengthen as economic fundamentals improve, while bofa takes a contrary position, anticipating further weakness in the currency.

Watch USD/JPY closely for signs of intervention or shifts in monetary policy from the BOJ, as these will significantly impact the trajectory of the pair moving forward.

What the calendar says

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