Societe Generale analysts highlight that the Yen remains weak despite significant undervaluation relative to purchasing power parity and an improved balance of payments. They suggest that concerns regarding the government's ability to maintain a downtrend in the debt-to-GDP ratio are overblown. Improved confidence in fiscal management after upcoming elections is expected to help USD/JPY drop towards the mid-140s in 2026.

Yen weakness and fiscal management outlook

"The yen has remained weak despite extreme undervaluation relative to purchasing power parity and an improvement in the country’s balance of payments."

"We think the concerns about the government’s ability to maintain the recent downtrend in the country’s debt /GDP ratio are overdone."

"Improved confidence in fiscal management after the upcoming elections in Japan should help USD/JPY drop back towards the mid-140s in 2026 and we see room for a faster fall in EUR/JPY."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)