Yen expert bullish on 2025? The Japanese yen may see 150 in the short term, with a reversal opportunity in the medium term

Japan’s newly appointed Prime Minister Shigeru Ishiba recently sent a clear dovish signal, claiming that now is not the time to raise interest rates. This move directly impacted market expectations for a bullish yen. Since October, the USD/JPY exchange rate has fallen nearly 4%, falling back into a weak position.

Short-term pressure, market sentiment reversal

Hedge funds initially hoped that Ishiba would adopt a more hawkish monetary policy stance and built long positions in the yen. However, the actual policy shift caught these bets off guard. Yujiro Goto, Head of FX Strategy at Nomura Securities, pointed out: “Considering the unexpectedly strong US employment data, the likelihood of the USD/JPY breaking through the 150 level in the short term has significantly increased.”

Shoki Omori, Chief Strategist at Mizuho Securities, has an even more pessimistic view, believing the yen could even bottom out at around 155. The better-than-expected US non-farm payroll data further dampened market expectations of aggressive easing by the Federal Reserve. The widening interest rate differential between Japan and the US has become the main driver pushing the yen lower.

Medium-term optimism, Yen Mr. supports appreciation

However, not all voices are bearish on the yen’s outlook. Hideo Sakakibara, who earned the nickname “Yen Mr.” for his precise currency market predictions during his tenure as Japan’s Finance Minister from 1997 to 1999, recently expressed a very different view. Currently the Director of the Japan Research Institute, Sakakibara stated that although short-term yen depreciation pressures are hard to eliminate, looking toward 2025, as the US economy potentially weakens and Japan’s economy relatively strengthens, it would not be surprising for the yen to appreciate to around 130.

The logic behind this forecast is that the gradual divergence of the US and Japan economic cycles will change the current interest rate differential landscape.

Policy stance clear, US-Japan interest rate differential dominates

Analysts point out that both the Japanese government and the Bank of Japan have taken a conservative stance on interest rate hikes, and short-term policy changes are unlikely. This means that the decisive factor influencing the yen’s trend will continue to be the US-Japan interest rate differential, especially the US economic data and the Federal Reserve’s subsequent decisions. Investors should closely monitor these two variables to determine which target level—short-term 150 or medium-term 130—will be reached first.