Westpac analysts expect USD/JPY to test 162 in September before retreating to 154 by end-2027 and 146 by the end of 2028.

The US Dollar to Japanese Yen (USD/JPY) exchange rate slipped to 159.6004 on Wednesday, leaving Westpac’s September forecast target of 162 around 1.5% above spot.

USD/JPY had climbed as high as 160.3872 during the previous 48 hours before reversing sharply, while the daily decline reached 0.37%.

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The chart above shows the pair giving back its advance through 160.30 and finishing near the bottom of its 159.4938-160.3872 range.

Westpac’s September call is effectively for one more test higher rather than an unprecedented breakout.

The pair traded as high as 163.9798 in July, so 162 has already proved reachable this summer.

What follows in Westpac’s forecast curve is far more interesting.

The bank sees USD/JPY easing to 160 in December and remaining there in March 2027, before falling to 158 in June, 156 in September and 154 at the end of next year.

The decline then continues at a remarkably steady pace: 152 in March 2028, 150 in June, 148 in September and 146 in December.

From the forecast peak of 162 to the final 146 target, that would be a 9.9% fall in USD/JPY and an appreciation of almost 11% for the Yen against the Dollar.

The Yen recovery is not built on aggressive Fed cuts

Westpac’s accompanying interest-rate forecasts make the currency path more striking.

The bank keeps the Federal Funds rate at 3.625% throughout the forecast period, rather than relying on a sizeable US easing cycle to pull USD/JPY lower.

It also expects the US 10-year Treasury yield to ease only modestly, from 4.65% in September to 4.55% in the first half of 2027.

The yield then rises gradually to 4.85% by December 2028, precisely when USD/JPY reaches 146.

In other words, Westpac is forecasting a major Yen recovery without a lasting collapse in US yields.

The published figures do not include a separate Japanese interest-rate path or written explanation for the move, so it would be wrong to assign the decline to one specific catalyst.

Still, the curve fits a market increasingly focused on whether Japanese policy can take over from direct currency support.

As we noted in our recent Yen analysis, intervention can deliver an abrupt move but has struggled to overcome the interest-rate gap for long.

Westpac’s numbers instead describe a slow adjustment lasting more than two years.

These are dated forecast points rather than promised trading stops, but the message is unusually clear: 162 may come first, while the bigger move is eventually lower.

Friday’s Japanese household-spending figures and US employment report provide the next test, with Westpac forecasting a 70,000 rise in payrolls against a market estimate of 55,000.

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