Lately, I've been really interested in the trend of the Japanese yen. Since 2026, the USD/JPY has been fluctuating between 152 and 160, and as more and more pessimistic voices emerge about the yen's exchange rate forecast, I've been thinking about how much longer this depreciation trend will last.

Speaking of why the yen has been falling, the underlying logic is actually quite complex. First, there's the huge interest rate differential between the US and Japan. U.S. interest rates are high, while the Bank of Japan is relatively cautious about raising rates, which directly leads to large-scale arbitrage trading—investors borrowing low-interest yen to invest in high-yield dollar assets, creating continuous selling pressure. Plus, the new Japanese government’s fiscal stimulus policies, while aimed at boosting the economy, have also increased debt burdens, raising market concerns about Japan’s fiscal risks.

Another factor that can't be ignored is the Middle East situation. Japan relies heavily on Middle Eastern oil, and the risks in the Hormuz Strait directly threaten energy security, pushing up import costs. The trade deficit widens, and the yen naturally comes under pressure. Additionally, Japan’s domestic economic fundamentals are somewhat weak—consumption is lukewarm, and GDP occasionally shows negative growth—these factors make the Bank of Japan cautious about raising interest rates.

Currently, market focus is entirely on the Bank of Japan’s policy shift. Previously, expectations were for a rate hike in April, but due to geopolitical risks, the central bank chose to hold steady. However, the latest forecasts suggest June is likely to be the next window for a rate increase, with the market’s probability of a June hike rising to about 76%. If the BOJ actually raises rates in June, the US-Japan interest rate differential will start to narrow, which will have a tangible positive effect on the yen’s trend.

Regarding the future outlook for the yen exchange rate, opinions among institutions are still divided. JPMorgan is more pessimistic, predicting the yen could fall to 164 by year-end; BNP Paribas expects it to drop to 160. In the short term, if global risk sentiment remains stable, arbitrage trading will continue to pressure the yen, and USD/JPY should stay in a high range.

But I personally believe that what truly determines the long-term trend of the yen is Japan’s internal structural reforms. Only when economic growth momentum genuinely improves and a healthy “wage-price” cycle stabilizes can the yen fundamentally reverse its decline. In the short term, focus on policies; in the long term, focus on fundamentals—that should be the core logic for predicting the yen’s exchange rate.

For friends who need yen, consider buying in installments rather than rushing to buy all at once. For investors, the key is to closely monitor the BOJ’s statements, changes in the US-Japan interest rate differential, and fluctuations in global risk sentiment—these are the key variables influencing the yen’s trend.