The US Dollar to Yen (USD/JPY) exchange rate has remained close to 159.0 after recovering from intervention-driven declines earlier this month.

Although the pair remains elevated in the near term, Deutsche Bank expects a gradual move lower over the medium term and forecasts USD/JPY at 150 by the end of 2026.

The bank believes that current levels continue to reflect exceptionally wide US-Japan yield differentials, which have supported sustained Yen weakness.

Over time, however, Deutsche Bank expects those yield gaps to narrow as US monetary policy gradually normalises and Japanese inflation remains firmer than in previous years.

The bank also considers that Japanese authorities remain uncomfortable with excessive Yen weakness and are likely to remain active if speculative selling intensifies.

While further gains towards 160 cannot be ruled out in the short term, Deutsche Bank expects the broader trend to favour a stronger Yen over the next 12-18 months.