USD/JPY daily
BofA remains structurally bearish on JPY, raising their USD/JPY forecast to 165 (previously 160) and expecting the 10-year JGB yield to reach 1.65%. They see continued JPY weakness driven by accelerating Japanese outward investment, as households shift wealth away from yen deposits into foreign assets amid persistent inflation.
Key Points:
1๏ธโฃ Higher USD/JPY Forecast ๐
- New target: 165 by year-end (previously 160).
- Consensus remains lower at 148 (Bloomberg median).
- JGB yields forecasted at 1.65% (up from 1.4%).
2๏ธโฃ BoJ Terminal Rate Revised Upwards ๐ฆ
- New BoJ terminal rate forecast: 1.5% (previously 1.0%).
- However, still distant from positive real interest rates.
3๏ธโฃ Accelerating Outward Investment ๐
- NISA scheme (2024 upgrade) has accelerated household shifts into foreign assets.
- Japanese investors seek protection from rising domestic inflation.
- Toshins (Japanese mutual funds) inflows into foreign assets indicate continued rebalancing away from JPY.
Conclusion:
BofA reinforces its structurally bearish JPY stance, forecasting USD/JPY at 165 by year-end. Japanese households’ portfolio rebalancing and lack of positive real rates will likely drive continued JPY weakness.
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