Barclays
FX Outlook 2026: Navigating the Turn
LIVE28 November 2025USD bearish
Back to CurrenciesModerately Bullish
USD/JPY
Gradual recovery, not revolution
BARC Forecast Path
Cross-Firm Forecast Comparison
Key Drivers
BoJ normalization pace
Carry trade dynamics
MoF intervention
Rate differentials
REER undervaluation
All Firm Targets (Dec '26)
JPMBearish164.00
INGBullish152.00
BARCModerately Bullish149.00
GSBullish148.00
BofABullish147.00
MUFGBullish146.00
DBStrongly Bullish143.00
MSBullish140.00
Key Issues for 2026
1.BoJ normalization supports JPY but pace will be gradual
2.Carry unwind risk exists but not imminent in base case
3.REER undervaluation provides floor
4.MoF intervention credible at 160+
5.Rate differential compression orderly
Risk Scenarios
Sharp rally140-145
Carry trade panic unwind + BoJ aggressive hike
Base case149-152
Gradual BoJ normalization, moderate carry reduction
Bearish162+
US rates stay high, carry trade resilient
Analysis Summary
JPY to recover moderately as BoJ normalizes and carry trade headwinds build. USD/JPY 149 by year-end reflects gradual improvement rather than sharp reversal. Carry unwind risk provides asymmetric optionality but base case is orderly.