UBS raises USD/JPY forecast on elevated energy prices/ - Investing.com
UBS's recent adjustment to its USD/JPY forecast reflects the ongoing influence of elevated energy prices on the Japanese economy. As the yen grapples with persistent inflationary pressures, this revision underscores how external factors, particularly commodity prices, are reshaping currency dynamics.
What the desk is arguing
The desk agrees with UBS's call to raise the USD/JPY forecast, as rising energy prices are likely to prompt further depreciation of the yen. This aligns with our understanding that external inflationary pressures are substantially impacting the Bank of Japan's (BoJ) monetary policy stance, potentially extending low interest rates into the foreseeable future.
Moreover, the current consensus target across major firms indicates a broader expectation of USD/JPY trending higher, reinforcing UBS's position. The scenario where energy prices stabilize or decline could present a counterfactual risk to these forecasts but seems less likely given current geopolitical tensions affecting supply.
Where it sits in our coverage
The current consensus target for USD/JPY stands at 147.5 for December 2026, with an observed range from 150.0 to 157.0. This reflects a growing divergence among firms, with some predicting further yen depreciation in response to continued energy cost pressures.
Notably, the following firms have set aggressive targets for USD/JPY by December 2026: - **JPMorgan**: 164.0000 - **Goldman**: 148.0000 - **Deutsche Bank**: 143.0000
How other firms see it
While UBS is raising its forecast, several firms maintain a more cautious outlook on the yen. **Morgan Stanley** anticipates a target of 140.0000 by December 2026, clearly diverging from UBS's more bullish stance.
Additionally, firms such as **Mitsubishi UFJ** and **Barclays** align with a moderate outlook, projecting values closer to 146.0000 and 149.0000, respectively. This suggests that among analysts, there is a split in expectations, as some view the yen's decline as unsustainable in the long term.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01UBS's upward revision of USD/JPY forecast highlights the impact of elevated energy prices.
- 02Current consensus predicts a continued depreciation of the yen, aligning with UBS's view.
- 03Divergence exists among major firms on future USD/JPY targets, reflecting uncertainty in economic recovery.
Market implications
Continued energy price escalation could lead to further depreciation of the yen, compelling the BoJ to maintain accommodative policy measures longer than expected. This scenario suggests a sustained upward pressure on USD/JPY, potentially impacting import costs and inflation in Japan.
Risks to this view
A significant drop in energy prices due to geopolitical stabilization could alleviate inflationary pressures in Japan, which may lead to a recalibration of forecasts. Furthermore, unexpected shifts in monetary policy by the BoJ could alter the Japanese economic landscape and impact USD/JPY trajectories.
Sources & References
How we cover this story
Cross-firm research
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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.
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