BofA cuts USD/JPY forecast for end-2026 on improving yen outlook - Investing.com

What the desk is arguing

The desk interprets BofA's decision to cut their USD/JPY forecast as a critical reflection of a strengthened outlook for the Japanese yen, which may indicate a broader market sentiment shift. The revision aligns with expectations of tighter monetary policy in Japan and potential easing pressures from the Bank of Japan amidst a globally shifting economic landscape.

Supporting this perspective, BofA's new December 2026 target of 147 directly challenges the higher-end forecasts from firms like Morgan Stanley and JPMorgan, which project targets of 140 and 164, respectively. This mounting pressure could create positional opportunities as diverging forecasts suggest volatility may pulse through the pair.

Where it sits in our coverage

Our consensus target for USD/JPY currently stands at 148, set against a range from 145 to 164. Notable firms include: - jpmorgan: Dec26 164.00 - goldman: Dec26 148.00 - barclays: Dec26 149.00

BofA's forecast of 147 sits near the lower bound of the current consensus range, reflecting a more cautious outlook compared to jpmorgan and morganstanley, who hold significantly higher targets.

How other firms see it

General sentiment among aligned firms like goldman and deutschebank leans towards a more hawkish approach, anticipating potential USD strength over the medium-term. In contrast, firms such as bofa have issued lower projections, indicating a lack of confidence in sustained dollar dominance against the yen.

The shifts in USD/JPY also have implications for related pairs, particularly EUR/JPY, as the European Central Bank remains on an uncertain tightening path, which observers should watch closely for spillovers on the USD/JPY dynamic.