Bank of America Securities forecasts continued depreciation of the Japanese yen through 2026, citing persistent loose monetary policy and fiscal risks as key downward pressures.

Strategist Shusuke Yamada projects the USD/JPY exchange rate to surpass 160 in early 2026 before stabilizing around 155 by year-end. Meanwhile, EUR/JPY is expected to climb further to 190 in the first half of 2026.

The bank advises Japanese households to maintain structural shifts toward overseas equity investments, which typically accompany yen selling. Corporate outbound investments are also expected to remain robust.

While Federal Reserve policy may influence the yen, interest rate cuts alone may not necessarily strengthen the currency. If the Fed eases policy amid steady economic growth and above-target inflation, risk assets could benefit, potentially limiting significant USD/JPY downside even if the dollar weakens against higher-beta currencies.