Yen Outlook H2: The Carry Unwind Has Legs

With the BOJ hiking and the Fed cutting, the USD/JPY rate differential narrows for the first time in three years. We are outright bearish USD/JPY with a 3-month target of 148 and see GBP/JPY as the higher-beta expression of the same trade. Cross-border corporates with JPY-functional books carry large unhedged translation exposures — a cross-sell seam for the FX desk.

The pain trade is a fast yen appreciation as leveraged carry positions are cut. We hold short USD/JPY and short GBP/JPY, financed by long-dated vol. Corporates that borrowed in USD against JPY balance sheets are structurally short the yen and under-hedged — Markets should be quoting them forwards and cross-currency swaps now.

Reference

MR-JPY-FX-OUTLOOK-H2

Region

JAPAN

Asset class

FX

Published

06 Jul 2026