Five things to watch in markets in the week ahead
Investing.com - UBS has revised its USD/JPY forecast upward to 143 for end-2025 and 140 for end-2026, the investment bank announced Thursday.
The adjustment comes amid heightened political uncertainty in Japan, which has exceeded UBS’s previous base case expectations from April. Japan’s Liberal Democratic Party (LDP) faces leadership elections early next month while currently leading only a minority government.
UBS noted that markets may remain cautious until a leadership team emerges that can effectively address concerns about a potential Diet election within the coming year. The political instability has raised market worries about fiscal discipline and affected the long end of the Japanese Government Bond curve.
This uncertain backdrop has contributed to market perceptions that the Bank of Japan (BoJ) is maintaining a dovish monetary stance despite ongoing inflationary pressures and positive performance in Japanese equity markets.
UBS also highlighted that markets have already priced in expectations for another BoJ rate hike by the January 23, 2026 meeting, creating potential downside risk for JPY bulls if the central bank delays rate increases while the Federal Reserve implements cuts.
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