Citi presents its USD/JPY price forecast for 2025 by Investing.com

Investing.com — Citi updated its forecast for , providing information on the pair’s trajectory in both the medium and long term.

The bank’s strategists point out that the yen’s recent depreciation is largely driven by a hindsight narrative related to Japan’s digital account deficit. However, they suggest that this narrative of the yen’s structural weakness is a “mistake”, with the current state of the currency being more nuanced.

In its core medium-term forecast, Citi suggests the yen could weaken, potentially driving USD/JPY towards 150 by the end of 2024.

However, looking ahead, strategists warn that the pair could fall below 140 in early 2025, continuing its downward path to near 130 by the end of next year.

In explaining this forecast, Citi points out that various factors could reverse the yen’s recent weakness.

Among them is the potential repatriation of overseas earnings by Japanese corporations, which could put upward pressure on the yen. In addition, surplus travel and rising intellectual property royalties are improving Japan’s current account balance, which could further support the currency’s strength over time.

Citi also challenges the prevailing view that Japan’s digital account deficit reflects long-term structural weakness.

“In our view, this is essentially a trend-following argument that follows a retrospective narrative of JPY depreciation that has continued over the past ten years,” Citi strategists noted.

“It is based on a distorted story of the true image of the BOP of Japan, and it may take several years to rectify this distortion. During this period, short JPY positions held by a number of economic entities will remain and there should be steady market forces working to reverse these positions.”

However, Citi remains cautious on the yen’s near-term outlook. The bank acknowledges that significant factors such as portfolio investments and the broader financial balance will continue to influence USD/JPY movements.

They also caution that the pair remains sensitive to marginal changes in market conditions and flows.