UOB expects the Japanese yen to weaken, and thus raises its year-end forecast for USD/JPY to 158.

UBS strategists say that under the influence of Bank of Japan Governor Haruhiko Kuroda's speech, the Japanese yen strengthened this week, but this raises questions: what will happen if the central bank cannot raise interest rates later this month? UBS took this opportunity to raise their expectations for the US dollar against the Japanese yen. Strategists including Shahab Jalinoos wrote in their report, "The minimum needed to support the yen currently is dovish rate hikes, but to truly support the yen, rate hikes and a clear commitment to further hikes are likely necessary." Japan's foreign exchange policy seems more likely to continue to focus on currency weakness, with the USD/JPY exchange rate possibly testing 160 in 2026 to determine if there is an intervention bottom line. UBS has raised their forecast for the USD/JPY exchange rate at the end of 2025 from 152 to 158, and for the end of the first quarter of 2026 from 147 to 155. The main downside risks are either a very hawkish policy from the Bank of Japan or a significant slowdown in US economic growth or a large stock market decline.