Morgan Stanley and Bank of America recently released research reports pointing to the same conclusion — the Japanese Yen is severely undervalued and may rebound next year.
Morgan Stanley's specific forecast
According to analysis by Morgan Stanley's strategists, the USD/JPY exchange rate forecast will undergo a significant adjustment. As of November 25, the USD/JPY was at 156.60, a pullback from earlier highs. However, analysts believe this is not enough.
Morgan Stanley expects the USD/JPY to fall to around 140 by the first quarter of 2026, then rebound to 147 by the end of the year. This suggests the Yen could appreciate nearly 10% in the coming months. Strategist Matthew Hornbach and others noted, "The current USD/JPY deviates from fair value. If it reverts to normal levels, considering the potential decline in US yields, the exchange rate in the first quarter of 2026 will likely decrease significantly."