Rabobank holds yen bull view despite poor run, eyes Hormuz as key risk
Lead — Rabobank's conviction in a year-end strengthening of the yen against the dollar, despite its recent underperformance, hinges on structural shifts within Japan and the reopening of the Strait of Hormuz. Per the full note source, the bank maintains its forecast for USDJPY to finish lower, emphasizing that the timeline for Hormuz's reopening is critical. This perspective contrasts with the broader market sentiment, where the yen's status as a funding currency continues to exert downward pressure. The desk's analysis aligns with a cautious optimism regarding Japan's economic trajectory, influenced by the Bank of Japan's policy adjustments.
What the desk is arguing
Rabobank is holding firm to its forecast for USDJPY to decline by year-end, driven by ongoing structural changes in Japan's economy. The bank's analysis highlights the Strait of Hormuz's reopening as a pivotal factor, suggesting that a resolution within weeks is essential for the yen's potential recovery. Per the full note source, the yen's persistent weakness has been exacerbated by its role as a funding currency in risk-on environments.
The desk underscores that Rabobank's structural Japan thesis is rooted in gradual policy normalization by the Bank of Japan and evolving inflation dynamics. Despite the yen's poor performance this year, the bank's outlook remains optimistic, suggesting that any intervention efforts may merely offer entry points for speculators rather than reversing established trends.
The alternative read would suggest that if the Hormuz closure extends beyond the anticipated timeline, the yen could face prolonged weakness, complicating any bullish narrative for the currency in the near term.
Where it sits in our coverage
Our consensus target for USDJPY stands at 1.075, with a range between 1.04 and 1.12. Notable targets from other firms include: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26) - citi: 1.08 (Mar26)
This view aligns with jpmorgan's target, which sits at the upper end of our consensus range, while bofa presents a more bearish outlook, indicating divergence in market sentiment regarding the yen's trajectory.
How other firms see it
Several firms, including jpmorgan and citi, share a similar bullish outlook on the yen, aligning with Rabobank's structural narrative. Conversely, bofa maintains a more cautious stance, reflecting skepticism about the yen's ability to recover in the near term.
Watch the USD/JPY pair closely, as its movements will likely reflect shifts in sentiment regarding the Bank of Japan's policy direction and the geopolitical landscape surrounding the Strait of Hormuz.
What the calendar says
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USD/JPY — All Desk Targets
| Firm | Stance | YE 2026 |
|---|---|---|
UOB | Bearish | 163.00 |
Citi | Bearish | 163.00 |
MUFG | Bullish | 146.00 |
Rabobank is maintaining its forecast for USDJPY to end the year at lower levels, citing Japan's structural shifts, while flagging the Strait of Hormuz timeline as a key assumption underpinning the call. Summary: Rabobank has maintained its forecast for USDJPY to finish the year at lower levels, based primarily on structural changes underway within Japan, per the bank's note The yen has been a weak performer year to date, continuing to be weighed down by its reputation as a funding currency, according to Rabobank Rabobank cautioned that currency intervention tends to be ineffective at reversing established trends and can create opportunities for speculators to add to positions at more attractive levels, per the note The bank's year-end yen call is conditioned on the Strait of Hormuz reopening within weeks rather than months, with that timeline described as a key assumption in the baseline forecast, according to Rabobank Rabobank is holding its forecast for the yen to strengthen against the dollar by year-end, maintaining conviction in a structural Japan thesis even as the currency has remained one of the poorest performers in foreign exchange markets through 2026, with the Strait of Hormuz closure identified as the primary risk to that call. The yen has struggled to escape its long-standing reputation as a funding currency, a designation that keeps it under pressure in risk-on environments as investors borrow cheaply in yen to deploy into higher-yielding assets elsewhere.
That dynamic has persisted through the year to date, frustrating what Rabobank has consistently framed as a multi-year structural re-rating story rooted in changes taking place within Japan itself. The bank has not specified which structural shifts underpin its optimism, but the broader market context points to the Bank of Japan's gradual policy normalisation and the domestic inflation dynamics that have accompanied it as the likely drivers of the longer-term yen constructive view. On intervention, Rabobank struck a notably sceptical note.
The bank argued that currency intervention, while capable of engineering a short-term turn, is more likely to represent a temporary disruption to an established trend than a durable reversal. In that framing, intervention becomes less a policy tool and more an entry point, potentially offering speculators the chance to add to existing positions at more favourable levels rather than forcing them to cover. The most significant conditionality in the note concerns the Strait of Hormuz.
Rabobank's year-end USDJPY downside forecast rests on an assumption that the waterway reopens within weeks rather than over a period of several months. The yen's behaviour under an extended Hormuz closure is materially different from its behaviour in a world where energy supply disruption resolves relatively quickly, and the bank's willingness to flag that dependence explicitly reflects how central the geopolitical timeline has become to near-term currency forecasting across asset classes. --- Rabobank's decision to hold a year-end yen strengthening forecast despite persistent underperformance reflects a conviction trade rather than a momentum call, and the distinction matters for positioning. If the structural Japan thesis is correct but the Hormuz closure extends beyond the weeks assumed in the baseline, the yen faces a prolonged period of further weakness before any fundamental turn materialises, handing carry traders additional runway.
Sources & References
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Cross-firm research
USD/JPY Consensus Check: Spot at 161.71, Median Target 149.0 — Week of July 12, 2026
USD/JPY trades 8.53% above the 23-firm median Dec-26 target of 149.0, with a 25-point dispersion that reflects deep disagreement on the BoJ rate path.
USD/JPY Consensus Check: Spot at 161.71, Median Target 149 — Week of July 11, 2026
USD/JPY trades at 161.71, some 8.53% above the 23-firm median Dec-26 target of 149.0, with a 25-point dispersion signalling deep disagreement on the BoJ path.
USD/JPY at 161.71: Consensus Targets 149.0 With a 25-Point Spread
USD/JPY trades 8.53% above the 23-firm Dec-2026 consensus of 149.0, with a 25-point dispersion that reflects sharply divergent BoJ and US rates assumptions.