USD/JPY: Back to the 1980s
The desk believes that USD/JPY has entered a pivotal phase reminiscent of the 1980s, with the pair breaking above the 162 mark. This development reflects significant market positioning against the yen and increasing speculation regarding the Bank of Japan's potential intervention, particularly given Japan’s ongoing cost of living crisis. Notably, the BoJ had previously intervened around the 160 handle, prompting expectations for further action soon. Per the full note from ing-think, traders are weighing the timing of any intervention against upcoming US data releases that could further impact the dollar's strength.
What the desk is arguing
The desk is framing the dramatic rise in USD/JPY as a return to the volatility seen in the 1980s, suggesting that the Japanese yen is under significant pressure. As noted in the commentary from ing-think, with USD/JPY surpassing 162, traders are eagerly anticipating another round of intervention from the Bank of Japan, especially as the country grapples with inflationary pressures and rising import costs.
Evidence supporting this view includes the BoJ's recent sale of over $70 billion in April and May to defend the yen, which highlights the central bank's commitment to stabilizing the currency. Market positioning also indicates a net short yen stance, albeit less extreme than during the summer 2024 intervention period.
Where it sits in our coverage
Our current consensus targets for USD/JPY suggest a target of 148.0 by December 2026, with a range spanning from 149.0 to 160.3. Noteworthy per-firm targets include: - hsbc: Dec-26 target at 145.0 - jpmorgan: Dec-26 target at 164.0 - goldman: Dec-26 at 148.0
The desk's perspectives appear to diverge from the consensus, particularly as it anticipates more aggressive near-term interventions that may not align with current forecasts, which generally indicate a strengthening yen over a longer horizon.
How other firms see it
Firms such as hsbc and jpmorgan hold contrasting views; while hsbc leans towards further yen depreciation, jpmorgan is more optimistic about a return to stability. Meanwhile, others like goldman support a cautious approach, expecting slight recoveries.
The trajectory of USD/JPY will likely influence the unfolding dynamics in EUR/USD and GBP/USD, particularly as shifts in the BoJ's policy are observed. Watch these pairs closely for potential spillover effects.
What the calendar says
Currently, there are no high-impact events scheduled that could affect expectations preceding the next likely BoJ interventions, leaving traders to navigate the current technical landscape and speculative positions.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01USD/JPY has crossed above 162, evoking comparisons to the 1980s volatility.
- 02Speculation intensifies around the timing of the BoJ's intervention amid cost of living pressures.
- 03Current consensus targets reflect a projection of stabilization towards lower levels by late 2026.
- 04Market positioning indicates a net short yen stance, but less extreme than during past intervention campaigns.
Market implications
Traders should closely monitor USD/JPY around the 162 level, as any signs of BoJ intervention could lead to a rapid re-evaluation of the current bullish outlook on the dollar. Positioning could shift dramatically if upcoming events suggest a more hawkish stance from the Federal Reserve or immediate user commentary points in favor of the dollar.
Risks to this view
The main risk to this outlook would be a lack of intervention from the BoJ in the near term, which could fuel further yen depreciation and challenge traders' short positioning. Additionally, any unexpectedly strong US economic data may solidify the dollar's strength, compounding the pressures on the yen.
EUR/USD — All Desk Targets
| Firm | Stance | YE 2026 |
|---|---|---|
Goldman Sachs | Bearish | 1.1200 |
UOB | Bearish | 1.1140 |
ABN AMRO | Bullish | 1.1500 |
Articles USD/JPY: Back to the 1980s 12:45 FX Japan United States Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download In breaking above the 2024 highs near 162, USD/JPY has returned to levels not seen since the 1980s. Traders continue to second-guess when and where the Bank of Japan will intervene again, but the outlook for successful intervention remains poor Chris Turner Tokyo: imagery from the 1980s reflects the backdrop revisited by USD/JPY Intervention incoming Having sold just over $70bn in late April/early May at levels just above 160, the BoJ is widely expected to intervene again over the coming days and weeks. Japanese officials have made it clear that the weak yen poses a threat to import costs and Japan’s cost of living crisis, which has been a key topic for the electorate.
Currently, those cost of living concerns are being addressed through government subsidies, which themselves bring some concern for the bond market. In recent years, the BoJ has typically intervened in clustered bursts of two to three days when it believes intervention is most likely to be effective. These episodes have tended to coincide with holiday-thinned market conditions, allowing the BoJ to deliver a bigger bang for its intervention buck.
Also important is market positioning. What we note today is that the speculative position is quite short yen, but not as extreme as it was during the successful intervention campaign of summer 2024. In terms of immediate timing, we suspect the BoJ might hold off ahead of possible dollar-positive event risks such as remarks tomorrow from Federal Reserve Chair Kevin Warsh and Thursday’s release of the June US jobs report.
That makes Friday’s US July 4 th holiday a possible window for intervention. A no-show from the BoJ this week would strengthen the case for holding off until 16–17 July, just ahead of Japan’s next public holiday, Marine Day on 20 July. That was the 2024 playbook.
If the BoJ does wait until later in July and US data and Fedspeak remain hawkish, USD/JPY could be trading around 164–165 by then. For reference, the FX options market now attaches a 37% probability to USD/JPY touching 165 by the end of July. Speculative yen positions and USD/JPY Source: Japanese Ministry of Finance, ING "> Source: Japanese Ministry of Finance, ING Constraints on intervention?
FX reserves are finite resources and bouts of selling are used with care. Currently, Japan has close to $1.1trn in FX reserves. The low point this decade has been around $1.07trn, but we doubt the $1trn level represents a psychological floor.
As a reserve currency issuer with a huge net international surplus position after decades of current account surpluses, Japan is not subject to the same reserve adequacy constraints as many other countries. That said, we suspect the authorities would be reluctant to lose more than a third of their reserves to intervention (as Chile did in 2022), suggesting that the $800-900bn range could be a practical floor for Japan’s FX reserves. At the same time, we think the Japanese are taking notice of the IMF’s classification system for ‘free floating’ exchange rates and would not want to lose that status.
Sources & References
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