BofA Global Research economists say the Bank of Japan may lead by using rate hikes as the primary tool to stabilize the yen. To make FX intervention durable and secure long-term yen stability, Japan will likely need to shift its policy mix; the most probable path is fiscal expansion paired with monetary tightening. BofA expects the BOJ to hike on a quarterly cadence and to end the tightening cycle in July 2027 with a terminal rate of 2%. BofA leaves its end-2026 USD/JPY forecast unchanged at 149

BofA Global Research economists say the Bank of Japan may lead by using rate hikes as the primary tool to stabilize the yen. To make FX intervention durable and secure long-term yen stability, Japan will likely need to shift its policy mix; the most probable path is fiscal expansion paired with monetary tightening. BofA expects the BOJ to hike on a quarterly cadence and to end the tightening cycle in July 2027 with a terminal rate of 2%. BofA leaves its end-2026 USD/JPY forecast unchanged at 149.