The Japanese yen continues to divide opinion among global investors. Bank of America’s latest fund manager survey shows sentiment turning more constructive on the currency’s longer-term prospects, with 30% of respondents expecting the yen to outperform in 2026, making it the most favoured asset ahead of gold. The survey suggests a belief that Japan’s policy trajectory could eventually normalise and support a stronger currency over time.
But near-term dynamics point in the opposite direction. The yen has dropped to a nine-and-a-half-month low against the dollar, weighed down by expectations of looser fiscal and monetary stances under new Prime Minister Sanae Takaichi. MUFG strategist Lee Hardman says the latest economic data — including a third-quarter contraction — has reinforced expectations of policy easing, intensifying selling pressure on the currency.
Hardman also highlights growing concerns about deteriorating public finances, especially as Finance Minister Satsuki Katayama signalled that the government’s fiscal package may be “somewhat larger so far.” Her comments expressing discomfort with the yen’s recent weakness have stirred speculation about possible FX intervention, but MUFG argues that verbal pushback alone is unlikely to halt the currency’s decline.
The divide leaves investors weighing two competing narratives: a structurally stronger yen in the medium term versus a continued slide in the weeks ahead as markets adjust to Japan’s policy pivot and softening economic backdrop.
