Japanese Yen: Debt concerns shape FX outlook – Rabobank

Rabobank's Senior FX Strategist Jane Foley discusses USD/JPY in context of fiscal and debt dynamics in Japan and the United States (US). She highlights how government spending plans, changing demand for long-dated debt and Treasury Secretary Bessent’s buyback plan have influenced the Dollar and Japanese Yen. Rabobank maintains a 3‑month USD/JPY forecast of 158, while warning of potential near‑term upside attempts.

Fiscal risks weigh on USD/JPY

"As the USD fell yesterday following news of Bessent’s buyback plans, USD/JPY was steered a little further away from the psychologically important 160 level."

"On the assumption that the BoJ will accelerate the pace of rate hikes, we maintain a 3-month USD/JPY forecast of 158, though we cannot rule out the possibility of further attempts at the upside in the near-term."

"That said, in our view the USD will continue to draw support from its dominant position within the global payment system, indicating that it can retain its safe haven status."

"Firmer BoJ policy rates, structural reforms and a resilient economy suggest there is a path for the JPY to find support in the months ahead."

"That said, Japan’s 2027 budget talks later this year could have a strong impact on market sentiment."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)