OCBC's report highlights that the Japanese yen, currently undervalued, has faced persistent depreciation pressures despite its cheap valuation. The recent coordinated intervention by Japan and U.S. authorities aimed to stabilize the yen after it reached multi-decade highs in July, reflecting concerns over its excessive weakness.
OCBC analysts Sim Moh Siong and Christopher Wong noted that while this intervention is a step towards recovery, it will require further domestic policy changes to achieve sustained improvement. The Bank of Japan (BoJ) is reportedly becoming more open to normalizing its monetary policy, which could help narrow the policy gap with other major central banks.
OCBC has revised its yen forecast, expecting it to strengthen to 150 against the U.S. dollar by the end of 2027, driven by a potential shift in Japanese portfolio flows towards domestic assets.
Additionally, the report suggests that the Swiss franc will continue to be favored for carry trades as the yen strengthens, given the Swiss National Bank's policy rate is expected to remain at 0% through the end of the year