The Japanese yen’s weakness since 2025 has been a strictly nocturnal affair. According to Bank of America analysts, the currency consistently depreciates during London and New York trading hours while remaining stable when Tokyo is awake, supported by Japan’s strong balance of payments.
The offshore sell‑off has been driven chiefly by the AI boom and the Bank of Japan’s hesitancy. A tech rally prompted western investors to hedge currency exposure en masse, dumping the yen, while persistently slow tightening at the BOJ left the currency cheap fuel for speculators.
The picture shifted in July after a coordinated US–Japan intervention. Investor sentiment flipped: in August, roughly 60% of traders were positioned for a weaker yen, but by September, the number of pessimists had halved as markets began to price in faster BOJ tightening.
Bank of America recommends betting on yen strength. Analysts expect the BOJ to deliver three interest rate hikes and bring the policy rate to around 2% by July 2027. If the dollar tests the 160‑yen threshold again, authorities may be forced to tap reserves for fresh intervention. A correction in the overheated AI sector may also act as a backstop for the yen by knocking global risk appetite.
