There have been disagreements on Wall Street regarding the direction of the yen.
Institutions such as Goldman Sachs, Mizuho, JPMorgan Chase, and Bank of America all believe that the yen will continue to fall to its lowest level in more than 30 years. But the median forecast of institutional exchange rates surveyed by Bloomberg shows that the yen will rise to 140 yen per dollar in the first quarter of next year, and will rise to 130 yen by the end of 2024. Strategists have had their biggest divergence in yen forecasts in seven years.
The core of the Wall Street divide is the disagreement over the US economic outlook and its impact on the US dollar. The US dollar is the most traded currency against the Japanese yen. Those who believe that the Federal Reserve will maintain high interest rates expect the US dollar to strengthen and the yen to depreciate. In contrast, many institutions that anticipate the appreciation of the yen believe that a recession in the US economy and a weakening of the US dollar are inevitable.
There is still uncertainty surrounding whether the Bank of Japan will tighten its policies and intervene in the foreign exchange market. In this situation, Johan Gade, CEO of Saxo Bank Japan, stated:
What is more likely to change the trend of the yen is what will happen in the United States, rather than what the Bank of Japan will take
Gade said:
As you can see, last year's intervention level was around 150 yen, but now we have returned to around 150 yen. Therefore, in the long run, the effectiveness of these interventions is limited unless further action is taken to address the real driver of yen weakness, namely interest rate differentials
Currently, Bank of America expects the yen to fall to 155 yen per dollar in the first quarter of next year. This is also the level that a former senior Japanese foreign exchange official pointed out that the Japanese government will "start to worry about".
By comparison, Citigroup's foreign exchange strategists are the most optimistic. They expect the yen to rise to 130 yen against the US dollar in 6 to 12 months.
Dirk Willer, head of global macro and emerging market strategy at Citigroup, stated that their view is based on the US economic recession, which will ultimately lower US bond yields, coupled with some degree of tightening measures by the Bank of Japan.