UBS raises USD/JPY forecasts on oil prices and BoJ caution - Investing.com
UBS has revised its USD/JPY forecasts higher, citing rising oil prices and the Bank of Japan's cautious policy stance. This aligns with a hawkish USD view and challenges the consensus expectation of yen appreciation.
What the desk is arguing
UBS raises its USD/JPY forecasts, driven by higher oil prices and the Bank of Japan's cautious stance. Higher oil prices boost USD demand as oil is priced in USD, while the BoJ's reluctance to normalize policy keeps yen carry trade attractive. The revision signals a sharper divergence from the consensus view that the yen will strengthen by year-end.
UBS implicitly rejects the view that the BoJ will accelerate tightening despite persistent inflation. Instead, it sees the BoJ maintaining ultra-loose policy, which combined with high oil prices, supports USD/JPY upside. This contrasts with the consensus median target of 147.5 for Dec26, which implies a strong yen recovery.
Where it sits in our coverage
Our internal coverage shows a consensus median target of 147.5 for Dec26, but the firm spread is wide at 24 figures (from 140 to 164). Our published research highlights this dispersion and notes that the consensus is skewed bearish USD, yet UBS's revision to higher forecasts places it on the hawkish side of the spectrum.
Specific firms highlight the divide: **JPMorgan** has a Dec26 target of 164.00, the most bullish USD, while **Morgan Stanley** targets 140.00, the most bearish. **Barclays** at 149.00 and **ING** at 152.00 are closer to consensus but still below UBS's implied level if revised. The wide range underscores the uncertainty around BoJ policy and oil prices.
How other firms see it
**JPMorgan** aligns with UBS's hawkish view, forecasting USD/JPY at 164.00 by Dec26, well above consensus. **Morgan Stanley** is the strongest contrary, targeting 140.00, expecting aggressive BoJ tightening. **Goldman Sachs** at 148.00 and **Bank of America** at 147.00 are aligned with the consensus bearish USD view, opposite to UBS.
Other firms like **Deutsche Bank** (143.00) and **MUFG** (146.00) lean slightly below consensus, while **Barclays** (149.00) and **ING** (152.00) are more neutral. The diversity of views reflects the high uncertainty in USD/JPY outlook.
How firms align with this view
Aligned with the desk view
Key takeaways
- 01UBS raises USD/JPY forecasts due to higher oil prices and BoJ caution, challenging consensus yen strength narrative.
- 02Our coverage shows a wide firm spread of 24 figures for Dec26, with JPMorgan (164) and Morgan Stanley (140) at extremes.
- 03UBS's revision aligns with JPMorgan's hawkish stance but contradicts the majority of consensus and firms like Goldman Sachs and BofA.
Market implications
The revision may prompt a reassessment of yen weakness scenarios, supporting USD/JPY upside and widening the divergence between hawkish and dovish forecasts. This could increase volatility and attract speculative flows, especially if oil prices rally further.
Risks to this view
BoJ more hawkish than expected could trigger sharp yen reversal, invalidating UBS's call. Also, a sudden drop in oil prices would reduce USD demand and pressure USD/JPY lower. Policy missteps by the BoJ or Fed could exacerbate swings.
Sources & References
How we cover this story
Cross-firm research
USD/JPY at 156.80: Consensus Targets 147.5 but JPM Holds 164
USD/JPY trades 6.3% above the eight-firm median target of 147.5, with a 24-point dispersion range exposing deep disagreement on BoJ policy timing and US yield durability.
USD/JPY at 156.90: Consensus Targets 147.5, Spread Runs 24 Figures
USD/JPY trades 6.4% above the eight-firm median Dec-26 target of 147.5, with a 24-figure dispersion exposing deep disagreement on BoJ pace and US yield trajectory.
USD/JPY at 157.23: Consensus Sees 147.5, Spread Runs 24 Figures
USD/JPY trades 6.6% above the eight-firm median Dec-26 target of 147.5, with a 24-figure dispersion that maps directly onto competing BoJ rate-path assumptions.