Exchange Rates UK Research’s latest May 2026 survey of major investment banks shows the USD/JPY exchange rate is expected to gradually decline from current levels near 159.00 towards the 145–150 region through 2027, signalling expectations for a broader Japanese yen recovery after several years of sustained weakness.

The latest poll also suggests banks increasingly believe the peak in USD/JPY may already have passed, although most institutions still expect the pair to remain historically elevated compared with pre-2022 levels.

Latest Survey Signals Gradual USD/JPY Decline

The majority of forecasts in the latest Exchange Rates UK Research poll point towards a steady decline in USD/JPY over the coming quarters.

Banks including Citi, RBC Capital Markets, Scotiabank and Rabobank all expect the pair to move below 150 during 2027, while some forecasts extend towards the low-140s longer term.

Even institutions that remain more constructive on the US dollar, such as Goldman Sachs and CIBC, still project USD/JPY drifting lower from current levels.

Overall, the survey suggests banks increasingly expect the Japanese yen to regain some ground after a prolonged period of depreciation.

That outlook follows a remarkable multi-year rise in USD/JPY.

The pair traded below 130 as recently as 2022 before surging above 160 during 2025 and 2026 as widening interest rate differentials heavily favoured the US dollar.

Although USD/JPY remains close to multi-decade highs, recent price action suggests momentum has started to slow. April saw the pair retreat from above 160 towards the mid-150s before rebounding modestly during May.

Bank of Japan Policy Shift Remains Central Theme

The latest survey highlights how heavily the USD/JPY outlook continues to depend on monetary policy divergence between the Federal Reserve and Bank of Japan.

For several years, ultra-low Japanese interest rates encouraged investors to fund trades in yen and buy higher-yielding assets elsewhere, contributing to sustained yen weakness.

However, markets increasingly expect the Bank of Japan to continue gradually normalising policy after ending negative interest rates last year.

At the same time, investors are beginning to anticipate a slower US economy and eventual Federal Reserve rate cuts during 2026 and 2027.

That combination has started to narrow yield differentials slightly, helping stabilise the yen after years of sharp losses.

Markets also remain highly sensitive to the risk of Japanese government intervention whenever USD/JPY approaches or moves above the 160 level, which has helped limit further upside in recent months.

USD/JPY Outlook: Banks Expect Yen Recovery, But Dollar-Yen to Stay Historically High

The latest Exchange Rates UK Research survey suggests the broader trend in USD/JPY is gradually turning lower, with most banks expecting further yen recovery through 2026 and 2027.

However, forecasts still remain well above historical averages.

Even many of the more bearish USD/JPY projections imply the pair will remain significantly above the 110–130 trading ranges that dominated before the global inflation and interest rate cycle began.

For now, the survey points to gradual yen appreciation rather than a rapid reversal.

But with markets increasingly focused on Bank of Japan policy normalisation and the possibility of eventual US rate cuts, sentiment towards the yen appears to be improving for the first time in several years.