J.P. Morgan FX Strategy: What Is Needed to Halt or Reverse the Weak Yen Trend?

J.P. Morgan assesses the potential paths for the Japanese yen following coordinated intervention and rising BOJ rate hike expectations. The base case sees USD/JPY holding within a 155–165 range, with targets of 160 in 3Q26 and 164 in 4Q26.

Key Takeaways

• 1.J.P. Morgan's base case scenario sees USD/JPY stabilizing in a 155–165 range, maintaining targets of 160 for 3Q26 and 164 for 4Q26, supported by expected BOJ rate hikes roughly once per quarter.
• 2.An allocation shift by the GPIF within its existing basic portfolio could generate over ¥30 trillion ($188B) in yen buying, acting as a downside buffer rather than an aggressive sharp intervention.
• 3.A break below 150 (yen appreciation scenario) would require a large-scale unwinding of net JPY short positions (estimated at ¥16.4 trillion), triggered by Fed rate cuts, equity market corrections, or official portfolio/reserve adjustments.

Table of Contents

• What is needed to halt or reverse the weak yen trend?
• What is needed for the yen exchange rate to stabilize and/or shift into a yen appreciation trend?
• 1. Yen stabilization scenario (USD/JPY stabilizes within a 155–165 range)
• 1-1. The BOJ hikes once per quarter for the time being (other conditions unchanged, including what markets price for Fed hikes): expected USD/JPY range is 155–165
• 1-2. The Fed pauses rate hikes (other conditions unchanged, including what markets price for BOJ hikes): expected USD/JPY range is 153–163
• 1-3. GPIF allocation shift (no change to the basic portfolio; Fed/BOJ pricing unchanged): expected USD/JPY range is 155–165
• 2. Yen appreciation scenario (USD/JPY falls to 150 or below)
• 2-1. Fed rate cuts begin to be priced in
• 2-2. A major correction in Japanese equities triggered by accelerated BOJ hikes
• 2-3. A change to the GPIF’s basic portfolio
• 2-4. USD-selling intervention; expansion of the FIMA repo facility
• 3. Yen depreciation scenario (USD/JPY rises above 165)
• 3-1. A more dovish-than-expected BOJ and/or a more hawkish-than-expected Fed
• 3-2. Rising concerns about Japan’s fiscal risks

Report data

Figure 1: Estimated FX flows from BOP (including FX intervention) vs. off-balance flows

Reports in this series

Global Markets Strategy is shown in chronological order through this edition, published on September 1, 2026.

Part of the Global Markets Strategy series — view all 10 editions

1. Jun 29JPM Equity Strategy
2. Jul 6JPM Equity Strategy
3. Jul 8JPM Flows Liquidity A 2026-07-08
4. Jul 20JPM Equity Strategy
5. Aug 3JPM Equity Strategy August
6. Aug 10JPM Delta One Flows
7. Aug 10JPM Equity Strategy
8. Aug 17JPM Equity Strategy

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