UBS maintained a neutral stance on the Japanese yen, citing the Federal Reserve’s hawkish posture and the Bank of Japan’s gradual tightening as key drivers of sustained USD/JPY strength.
The Swiss bank forecast the dollar-yen pair will reach 160 by the end of 2026 and 158 by mid-2027, reflecting expectations that recent joint foreign-exchange intervention has only temporarily eased pressure on the yen. UBS noted that the intervention provided relief but did not address the underlying policy divergence between the Fed and the BOJ.
A sustained reversal in USD/JPY, according to UBS, would require softer U.S. economic data that allows the Federal Reserve to ease its policy stance, coupled with a more proactive Bank of Japan that restores confidence in the yen’s stability. Until such conditions materialize, the USD/JPY pair is expected to trade within an elevated range, the bank said.
The assessment comes amid ongoing debate over the effectiveness of coordinated FX measures and the limits of monetary policy divergence in shaping currency movements.
