USD/JPY Forecasts Diverge as Banks Predict 2026 Rate Shifts

News Flash 2026-05-06 00:31

Major banks are forecasting a wide range for the USD/JPY exchange rate by the end of 2026, with predictions spanning from 150 to 164. This divergence, termed a "14-point Forex Civil War," is driven by differing expectations of monetary policy changes by the Bank of Japan (BOJ) and the Federal Reserve. Banks anticipate the BOJ will raise rates to 1.00-1.25%, while the Fed is expected to cut rates to 3.50-3.75%, narrowing the interest rate differential and impacting the yen carry trade. The potential unwinding of the 7.5 trillion yen carry trade poses a significant risk to global markets, including cryptocurrencies. Historical data shows a strong correlation between yen movements and Bitcoin prices, with yen fluctuations accounting for a substantial portion of Bitcoin's price changes. As the BOJ considers further rate hikes, traders are closely monitoring upcoming meetings for potential impacts on global liquidity and crypto markets.

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