JPY A New And Higher Range

USD-JPY has breached the 162 level, prompting HSBC to revise its year-end forecast to 162 and mid-2027 forecast to 164. Despite expectation of eventual MoF intervention, the bank anticipates a new, higher range for the pair due to persistent interest rate differentials and domestic Japanese fiscal pressures.

Key Takeaways

• 1.USD-JPY has shifted into a new, higher range, driven by expectations of persistent US-Japan interest rate differentials and domestic fiscal concerns.
• 2.HSBC raised USD-JPY forecasts to 162 for end-2026 and 164 for mid-2027.
• 3.The Ministry of Finance (MoF) is expected to intervene eventually, though the trigger threshold has likely shifted higher.

Table of Contents

• JPY: A new and higher range
• Disclosures & Disclaimer
• Currencies Developed Markets
• No country for bears
• 1. US-Japan rate differentials are stabilising at still-unfavourable levels for the JPY
• 2. USD-JPY became negatively correlated with the 30-year yield differential again
• 3. Fiscal concerns are coming to the fore again as the government considers various new expenditures and investments
• 4. Retail investors are still investing in foreign equities
• 5. “Triple” falls in Japanese assets have become more common
• 6. The JPY has depreciated in all major “risk-off” episodes year-to-date
• 7. We still expect MoF intervention...
• 8. ...although the threshold may be slightly higher given the USD's shift post-FOMC
• 9. Gross short JPY positioning has reached an all-time high...
• 10. ...but net short JPY positioning has not

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