The most accurate forecaster at Bloomberg for the USD/JPY pair predicts a drop in the Japanese currency to 170 yen per dollar. Vikram Murarka, founder of Kshitij Consultancy Services, attributes his success to a simple strategy: he completely ignores news noise and verbal interventions from officials, relying solely on technical analysis.

In the last quarter, Murarka was one of the few strategists to correctly anticipate the yen’s fall below the 160 mark. According to him, instead of focusing on headlines from the Japanese Ministry of Finance, traders should map data onto price charts. Murarka focuses on the ratio of the Nikkei 225 and Dow Jones indices, the difference in short-term interest rates, and the yuan-to-yen exchange rate. He notes that since 2024, the dynamics between the Nikkei and Dow have best explained the behavior of the currency pair, relegating traditional yield differentials to a secondary role.

Currently, the Japanese currency is trading at its 40-year low of around 165 yen per dollar. The market is being pressured by the massive gap in interest rates and Prime Minister Sanae Takaichi’s extensive spending plans. Even record interventions failed to stabilize the yen. From late April to late May, authorities spent 11.73 trillion yen (approximately $72.3 billion) to support the national currency, yet the yen’s weakness persists.

Murarka is confident that carry trades will continue to weigh on the yen. The most optimistic scenario for Tokyo, in his calculations, is only a short-term rebound to 154 yen per dollar. The Ministry of Finance’s ability to influence the market has significantly diminished, making a target of 170 yen per dollar seem quite reasonable for the year.

Finance Minister Satsuki Katayama continues to threaten speculators with “appropriate actions” and urges pension funds to actively purchase domestic assets. However, traders doubt that the currency will experience sustainable growth without concrete actions from the Bank of Japan. Although the regulator raised interest rates last month, the market anticipates only one more modest increase of a quarter point by the end of the year. As Murarka summarizes, the Bank of Japan is likely to be the last major central bank to pursue aggressive tightening measures.