Citi says Japan's balance of payments recorded its largest improvement in yen supply and demand since 2019 during the second quarter of 2026. The bank expects the currency's long-term trend will likely shift from depreciation to appreciation and sees USD/JPY trading between ¥155 and ¥160 by year-end.
Citi's flow analysis points to a structural change in how yen moves through global markets. Japan's balance of payments showed the largest improvement in yen supply and demand since 2019 in the second quarter of 2026, the bank said.
Net yen purchasing has held up since late last year as overseas investors increased their investment in Japanese equities. Yen purchases dipped in the first quarter because of position adjustments at the March fiscal year-end, but inbound equity investment rose again in the second quarter. Outbound portfolio investment remains sluggish, and Citi said underlying yen supply and demand has clearly improved.
This year, USD/JPY has been pushed higher by yen-selling hedges from foreign investors responding to rising Japanese stock prices, along with long-term dollar-buying hedges from Japanese small and medium-sized enterprises. Against that backdrop, Citi said USD/JPY could trade between ¥155 and ¥160 toward the end of the year.
Source: Investing.com
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