USD/JPY 2026 Forecast: “14-Point Forex Civil War” Erupt

• USD/JPY 2026 major bank year-end 2026 forecasts range from 150 to 164, fueling a “14-point Forex Civil War.”
• Banks assume the BOJ raises rates to 1.00-1.25% and the Fed cuts to 3.50-3.75%, in line with OIS swap pricing.  
• A violent unwind of the 7.5T yen carry trade could trigger sharp risk-off moves across global liquidity and crypto markets. 

The world’s most-traded Asian currency pair, USD/JPY, sits at the center of a major policy clash heading into 2026. Leading banks such as J.P. Morgan and Scotiabank disagreed sharply on their direction, with forecasts spanning from 150 to 164. Diverging monetary policies from the Bank of Japan (BOJ) and the Federal Reserve are driving this split and reshaping global liquidity flows.

Banks Split on 2026 USD/JPY Year-End Targets

According to sources, major banks are split on 2026 USD/JPY year-end targets, with forecasts ranging from 150 to 164, fueling a “14-point Forex Civil War.” J.P. Morgan forecasts year-end at 164, Scotiabank at 150, and ING at a gradual decline to 153 by Q4. This sharp divergence in USD/JPY 2026 forecasts highlights ongoing uncertainty in the world’s most-traded Asian currency pair.

This wide divergence reflects heightened uncertainty over the yen’s trajectory against sustained US dollar strength. USD/JPY is the most actively traded forex pair in Asia and the third most liquid currency pair globally. In 2025, it traded within a wide range of 139 to 158 as the BOJ began shifting away from ultra-loose monetary policy, while the Federal Reserve began easing interest rates.

BOJ and Fed Policy Rates Drive the Divergence 

The sharp split in 2026 USD/JPY year-end forecasts stems directly from differing interpretations of BOJ and Fed policy divergence. Banks assume the BOJ will steadily normalize rates, raising them from 0.75% to 1.00-1.25% by December 2026. Meanwhile, the Fed is widely expected to cut rates further to 3.50-3.75%, in line with current OIS swap pricing and market expectations. This narrowing interest rate differential from over 300 basis points reduces the appeal of the yen carry trade.

What’s the Impact on Crypto and Global Markets?

Notably, a violent unwind of the 7.5 trillion yen carry trade remains the biggest risk. Historically, such events trigger sharp risk-off moves that heavily impact Bitcoin (BTC) and broader crypto markets.

For instance, BTC’s 90-day correlation with JPY surged to a record 0.86 – 0.89 in late 2025 and early 2026, signaling an unusually tight link between BTC and JPY price action. During this period, both assets weakened in tandem, with yen movements accounting for up to 73% of BTC’s price fluctuations, highlighting rising macro-driven correlations across crypto and forex markets.

Furthermore, yen strengthening driven by faster BOJ rate hikes could trigger carry trade unwinds, tightening global liquidity, and putting pressure on crypto markets. This dynamic is evident in early 2026, when BOJ policy tightening toward 0.75% coincided with BTC’s rejection near $94,000 and approximately $243M in outflows from U.S. spot BTC ETFs.

Therefore, traders are watching the June 2026 BOJ meeting for a possible 25bp hike to 1.00%, following the April hold at 0.75%. US non-farm payrolls and the Fed’s June meeting may guide rate expectations as USD/JPY hovers near 157–160 with elevated intervention risk.

Related: Yen Surges After Japan Steps In as Markets Face Pressure