Standard Chartered analysts Chong Hoon Park and Nicholas Chia state that the Japanese Yen is unlikely to experience significant appreciation in the near term, projecting USD/JPY to reach 160 by the end of Q2. This outlook is attributed to a weak flows backdrop, rising stagflationary risks, and a cautious Bank of Japan (BoJ) stance. The analysts have revised their 2026 GDP growth forecast for Japan down to 0.7% from 0.9%, while raising their CPI inflation forecast to 2.0% from 1.8%, citing an intensifying terms-of-trade shock driven by surging energy prices and the USD/JPY trading near the 160 level [1].
Standard Chartered expects the BoJ to keep its policy rate unchanged at 0.75% during the April meeting, noting that the threshold for further tightening has increased significantly due to weakening domestic demand. Their base case scenario anticipates a BoJ rate hike in Q3, rather than in April [1].
The analysts do not foresee significant Yen appreciation in the near term, maintaining their forecast of USD/JPY ending Q2 at 160, given the still-unconducive flows backdrop. However, they note that a surprise BoJ rate hike in April and sustained USD weakness—potentially driven by market optimism over a material de-escalation in geopolitical tensions—would pose downside risks to their USD/JPY forecast [1].
CONCLUSION
Standard Chartered projects limited upside for the Japanese Yen in the near term, with USD/JPY expected to remain around 160 through Q2 as the BoJ maintains a cautious policy stance. The outlook could shift if the BoJ surprises with an April rate hike or if the USD weakens on improved geopolitical sentiment.