Lately, I've been watching the trend of the Japanese yen exchange rate, and it's quite interesting. These days, the USD/JPY is climbing again, almost erasing the effects of the Japanese authorities' intervention at the end of April. Market expectations for the Federal Reserve's rate hikes are heating up, combined with concerns over Japan's expanding fiscal policy, putting significant pressure on the yen.

However, institutional opinions are starting to diverge. JPMorgan still remains bearish, believing that the global monetary policy cycle is extremely unfavorable for the yen, and high oil prices are reinforcing their bearish outlook. They stick to their target of USD/JPY reaching 164 by Q4 2026, believing that even with concerns about official intervention, the pair will ultimately break through the current range.

But Bank of America Securities has shifted its stance. They have changed their view on the yen from bearish to neutral, and lowered their USD/JPY forecast for the end of 2026 from 157 to 152. The reason is that structural capital flows in the yen are improving, and other major currencies also have their vulnerabilities. They believe that although the yen will still face short-term pressure, the conditions for a medium-term reversal are accumulating.

Morgan Stanley pointed out that this situation is like the yen facing extreme two-way risks. The key point is the Bank of Japan's June meeting. If the central bank does not raise interest rates in June, the exchange rate could fall to 170. Conversely, if the BOJ hikes rates and the global economy remains stable, the yen could rebound to around 140. Currently, traders estimate about a 78% chance of the BOJ raising rates, so June is truly a pivotal month.

BofA also listed three potential catalysts that could trigger a yen reversal: a break above 160 in USD/JPY prompting policy intervention, the 10-year Japanese government bond yield approaching 3% pushing up real interest rates, and Brent crude oil falling below $90. If these conditions occur sequentially, there is still room for a rebound in the yen exchange rate. It all depends on how the BOJ decides in June.