The "ultimate constraint" has been lifted? Bank of America: After joint intervention, the yen is expected to rebound by about 6% within the year.

Bank of America released its latest exchange rate forecast on Wednesday, significantly raising its year-end target for the Japanese yen against the US dollar. It expects the yen, currently around 158, to appreciate by approximately 6% to 149 per dollar by the end of the year, driven by coordinated interventions from the US and Japan as well as anticipated interest rate hikes from the Bank of Japan over the coming months. The previous forecast was 152. A team of analysts from Bank of America, represented by Yamada Hidesuke, Izumi Devalier, and Yamashita Tomonobu, noted that the recent joint intervention has significantly raised the threshold for the success of the yen's "defensive battle," and to maintain the gains, macroeconomic policies must follow suitspecifically, accelerating the pace of interest rate hikes. They stated in the report, "If the Bank of Japan acts in September rather than waiting until October, it will have the opportunity to demonstrate its determination to proactively address the inflationary risks." Looking back, the significant interest rate differential between the US and Japan had once pushed the yen to a nearly 40-year low of close to 164. However, following the first joint yen-buying intervention by the two countries since 1998, the yen quickly rebounded to around 155 and rose for four consecutive trading days. Although it then retraced some of its gains, both governments have indicated their readiness to act together again if necessary. Bank of America analysts believe this political signal is highly significant: "When unilateral interventions support the local currency, the size of foreign exchange reserves can be viewed as a ceiling; however, with US involvement, the ultimate constraint of intervention has effectively been lifted." At the same time, Bank of America modestly raised its yen forecast for this quarter from 154 to 153. Analysts emphasized that the coordination between the US and Japan reflects a shared long-term goal of stabilizing the yen, stating, "There are now stronger reasons to believe that Japan will introduce a broader policy mix beyond foreign exchange intervention to support the yen in the medium to long term."