Morgan Stanley and MUFG Bet on Yen Strength in 2025
21 February 2025
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Two of the world’s largest financial institutions, Morgan Stanley and MUFG, are aligned in calling for the Japanese yen to outperform all other G10 currencies this year. Their outlook is anchored on three core themes: falling U.S. Treasury yields, a tightening policy stance from the Bank of Japan, and stronger-than-expected Japanese economic growth.
Technical and Fundamental Drivers
USD/JPY remains under pressure, with daily chart oscillators showing the pair is not yet in oversold territory. This leaves room for additional downside in the dollar as yield spreads narrow in Japan’s favour. MUFG has doubled down on its bearish stance in yen cross trades, maintaining a short EUR/JPY position with a target of 150 from current levels near 157. The bank argues that rising Japanese wages and narrowing rate differentials continue to support a stronger yen.
Beyond the Yen: Other FX Calls
Morgan Stanley’s 2025 playbook also includes a constructive view on the Australian dollar, underpinned by steady domestic demand and resilience in commodity-linked exports. The New Zealand dollar, while still projected to appreciate, is expected to lag behind AUD due to weaker growth fundamentals and softer policy expectations.
Market Implications
If these forecasts play out, investors could see the yen reclaim its traditional safe-haven role, pressuring both the dollar and the euro in the months ahead. The call also highlights a shifting global macro backdrop where central bank divergence is once again the key driver of FX performance.
