The Japanese yen has been falling hard for months, and one of the world's most accurate forecasters says it could fall even further.
Vikram Murarka, who founded Kshitij Consultancy Services in Kolkata, India, and serves as its chief currency strategist, runs a technical-analysis model that ignores headlines and focuses on price charts. He recently topped Bloomberg's survey of dollar-yen forecasters for the second quarter. His call: the yen could drop to 170 per dollar within the next year.
A move to 170 would mark a further depreciation beyond the 160 level, which was a key psychological barrier. The yen's prolonged slide has already triggered record intervention from Japanese authorities, who spent ¥11.73 trillion earlier this year.
At present, the yen trades around 162.84 per dollar, a point it hasn't reached in about 40 years. Japan has already tried to stop the slide. It did not work for long. The yen kept sliding.
Murarka was one of the few who predicted earlier that the yen would break past 160. Now he thinks 170 is the next big milestone. He said "170 is a reasonable target for one year, and if that is broken, then higher levels come into the picture."
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Murarka pointed out that the carry trade - borrowing yen to invest in higher-yielding assets abroad - will keep weakening the currency. The yen also suffers from large interest rate gaps and the aggressive fiscal spending of Prime Minister Sanae Takaichi.
The Bank of Japan raised rates last month, yet overnight index swaps suggest traders anticipate only one more quarter-point hike this year, keeping Japan's rate differential unfavorable. Takaichi's inclination toward easy monetary policy is viewed as an obstacle to further BOJ rate increases.
This ongoing depreciation persists even though officials have spent a record amount to support the yen. Japan's Finance Minister Satsuki Katayama has repeatedly stated that she and her team are ready to intervene in the forex market whenever necessary. Earlier this month, Japan's top currency official Atsushi Mimura avoided explicitly stating the finance ministry's usual position on currency intervention, including its capacity to act decisively - a move that hinted at possible intervention.
Murarka employs a forecasting approach that mostly disregards news and relies on technical analysis. "We don't look at the news so much," said Murarka. "Whatever we are tracking, we should be able to put it down into a price chart."
According to Murarka, the Nikkei-to-Dow ratio has been the most correlated with yen movements in recent years. "Since 2024, the dollar-yen movement is much better explained by the Nikkei-Dow ratio than by the yield spread," he said.
Murarka says the finance ministry's "capability to change market direction has diminished substantially."
As Murarka put it, "Among all the central banks, I think the BOJ would be the last to be very aggressive on rates."
The persistent pressure on the yen stems from a combination of factors: the carry trade, wide interest rate gaps, and the government's expansive fiscal policies. Despite the Bank of Japan's recent rate hike, markets expect only modest further tightening, keeping Japan's rates far below those in the U.S. and other major economies. This structural imbalance continues to weigh on the currency.
The bottom line: The yen's path lower is not guaranteed - currency forecasts are always a bet - but the forces driving it are real and persistent. If you own international assets or have any exposure to Japan, it is worth keeping an eye on that 170 number. A lot can change in a year.
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