Bank of America Says Yen Weakness Since 2025 Confined to Offshore Hours

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The Japanese yen's depreciation since 2025 has occurred exclusively during offshore trading hours, according to Bank of America. In an October 8 research note, analysts Shusuke Yamada and Izumi Devalier said the yen's weakness between the second quarter of 2025 and the second quarter of 2026 was driven entirely by trading in London and New York, a significant departure from 2021 through mid-2024, when the currency depreciated during both Tokyo and overseas sessions. The analysts attributed the yen's stabilisation during Tokyo hours to improvements in Japan's balance of payments, while identifying the artificial intelligence-driven equity rally and the Bank of Japan's gradual monetary tightening as likely contributors to offshore weakness. These pressures have moderated following coordinated Japanese and US currency intervention in July and growing expectations of faster monetary tightening, with the share of surveyed investors bearish on the yen falling from approximately 60% in August to 30% in September. The research team expects the BoJ to raise its policy rate by 25 basis points in December 2026, March 2027 and July 2027, reaching 2%, and maintained its recommendation to short USD/JPY, warning that renewed intervention could become a consideration if USD/JPY rises above 160.

Impact on assets 4

Financials▲
Bank of Japan
8301
▲ PositiveMonetaryrelevance

BofA expects the BoJ to hike 25bp in Dec 2026, Mar 2027 and Jul 2027 to 2%, reinforcing gradual tightening.

Bank of America Corp
BAC
± MixedCapitalrelevance

Bank of America is the author of the research note; no company-specific financial development.

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