BofA: Japan Determined to Break Yen at 155

Summary

Shusuke Yamada of BofA discusses the Japanese yen’s push to strengthen beyond 155 per dollar. He argues that coordinated US-Japan intervention and a Fed repo facility remove previous reserve constraints, making a break of 155 likely. Structural improvements in Japan’s balance of payments and potential unwinding of equity-related hedging flows support a constructive yen view, with a year-end target in the low 150s.

• BofA's Shusuke Yamada sees yen on track to break 155 with coordinated US-Japan intervention
• A Fed repo facility removes the hard limit of Japan's foreign reserves for intervention
• Failure to break 155 would signal authorities exhausted policy options
• Japan's balance of payments has improved, underpinning a structural yen appreciation
• Equity-related hedging by foreign investors has been a source of yen selling that could unwind
• BOJ rate hikes are seen as necessary for long-term yen support despite political hurdles
• Yamada's year-end yen target is low 150s