Commerzbank’s Volkmar Baur highlights that the Japanese Yen remains at historically weak levels, with USD/JPY trading above 162 and EUR/JPY near 186, reflecting ongoing softness in the currency [1]. Despite this extended period of weakness, Commerzbank has revised its near-term projections to a slightly weaker yen but maintains a forecast for gradual appreciation over the coming quarters [1]. The bank now expects USD/JPY to decline toward 145 and EUR/JPY toward 175 by the end of 2027, citing anticipated improvements in economic fundamentals and narrowing rate differentials as key drivers [1].
Baur notes that, contrary to earlier expectations at the start of the year, the yen’s weakness has persisted longer than anticipated. He acknowledges that there are valid reasons for this continued softness but reiterates the bank’s view that the yen should strengthen in the coming months as market sentiment shifts [1]. Commerzbank does not expect the Federal Reserve to raise its benchmark interest rate this year, despite current market pricing, and anticipates rate cuts by the Fed next year. Such a scenario would likely weigh on the US dollar and support yen appreciation, particularly against the dollar rather than the euro [1].
While the market has yet to be convinced of the yen’s recovery, Commerzbank believes a shift in sentiment could occur in the coming weeks, potentially catalyzing a stronger yen [1]. The bank’s outlook is underpinned by confidence in Japan’s economic fundamentals and the expectation of changing monetary policy dynamics in the US [1].
CONCLUSION
Commerzbank expects the Japanese yen to gradually appreciate over the coming quarters, despite its current historic weakness. The bank’s forecast is based on anticipated improvements in fundamentals and US rate cuts, which could shift market sentiment in favor of the yen.