Headline: Yen Rebound Hopes Fade as BOJ Caution and Fiscal Signals Weigh on Currency
The tide has turned against the Japanese yen, with optimism for a near-term recovery swiftly evaporating. Major global banks have cut their yen forecasts, investors are rolling back expectations for a Bank of Japan rate hike, and fresh fiscal signals under Prime Minister Sanae Takaichi are adding to downside pressure on the currency.
Several banks now expect a weaker yen through year-end and into 2026. JPMorgan lowered its year-end USD/JPY projection to 156 from 142 and sees 152 by March 2026, compared with a prior view of 139. Similar downward revisions from MUFG Bank and Sumitomo Mitsui Banking Corp. reflect broader skepticism that the BOJ will tighten policy soon. The central bank kept interest rates unchanged at its latest meeting, and Governor Kazuo Ueda emphasized the need for more data—guidance traders have interpreted as a cautious stance. Market pricing currently implies only a modest probability of a rate increase in December, and analysts note that political and fiscal dynamics are now exerting more influence on the yen than monetary policy alone.
Fiscal uncertainty is a growing headwind. Plans for “responsible and proactive” spending and the prospect of a large supplementary budget have raised concerns that looser fiscal policy could depress the currency further. The appointment of new members to the Economic and Fiscal Policy Council from Japan’s reflationist camp reinforces the view that Tokyo may tolerate a weaker yen in the near term. While some strategists anticipate eventual yen demand tied to profit-taking in Japanese equities, most see limited support until the size and scope of the new stimulus become clear. Markets will look to a November 10 speech by BOJ Policy Board member Junko Nakagawa for any fresh policy cues.
Key Points – Major banks cut yen forecasts; JPMorgan now targets 156 per dollar by year-end and 152 by March 2026 – BOJ left rates unchanged; Governor Ueda’s cautious tone keeps rate hike odds subdued – Market pricing implies only a moderate chance of a December BOJ rate increase – Fiscal plans under Prime Minister Sanae Takaichi, including a potential supplementary budget, are adding pressure on the yen – Reflationist appointments to the Economic and Fiscal Policy Council suggest tolerance for a weaker currency – Near-term support is limited; investors await guidance from BOJ’s Junko Nakagawa on November 10
Last updated on November 10th, 2025 at 01:10 am
