BofA: Yen faces summer weakness; we target USD/JPY at 155 by year-end

Financial institution of America maintains a bullish USD/JPY outlook, projecting the pair to rise to 155 by end-2025, citing a mixture of home political, fiscal, and trade-related dangers in Japan. They count on JPY and JGBs to weaken over the summer time as structural pressures mount.

Key Factors:

• Japan-US Commerce Talks Stalled:
  Lack of progress in bilateral commerce negotiations reduces the enchantment of Japanese property, doubtlessly delaying BoJ hikes and making a twist-steepening within the JGB curve.

• Fiscal Considerations Develop:
  Requires tax cuts from opposition events and even some ruling coalition members threaten fiscal self-discipline. With PM Ishiba’s approval rankings below stress, fiscal enlargement might turn out to be unavoidable—bearish JPY and JGBs.

• Political Instability Threat:
  Upcoming Higher Home elections might result in management adjustments or a coalition shift, including coverage uncertainty and weakening investor confidence in Japan.

• BoJ Coverage Outlook:
  BofA continues to count on no extra BoJ price hike till April 2026, leaving Japan on the mercy of structural capital outflows and a widening coverage divergence with the Fed.

Conclusion:

BofA sees JPY vulnerability constructing into the summer time, pushed by political threat, stalled reforms, and widening fiscal considerations. Their base case stays USD/JPY at 155 by year-end, assuming a Consumed maintain and no near-term BoJ hikes. Traders ought to put together for continued JPY and JGB weak point amid these home pressures.

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