G10 FX Strategy: Caution: Yen at Work

Research evidence excerpt

M

Global Idea

August 5, 2026 06:34 PM GMT

G10 FX Strategy

Morgan Stanley & Co. International plc+

David S. Adams, CFA

Strategist

Caution: Yen at Work

Morgan Stanley MUFG Securities Co., Ltd.+

Koichi Sugisaki

Joint US-Japanese intervention can buy time for the JPY but

doesn't change fundamentals – that requires lower US rates

and/or faster BoJ tightening. Near-term FX spillovers are likely

limited. Stay overweight Japanese equities despite intervention.

Strategist

Hiromu Uezato

Strategist

Takeshi Yamaguchi

Chief Japan Economist

Key Takeaways

Joint US-Japan JPY intervention has squeezed JPY shorts, but a sustainable USD/

JPY drop requires a shift in US rates.

Spillover to the broader USD should be limited, but lingering questions on US FX

policy and investor debate around the credibility of Fed policy are key USDnegative risks to watch.

Intervention suggests risks of a faster and earlier BoJ tightening; October remains

our base case for the next BoJ hike but September is a clear risk.

USD/JPY's current fair value is 165-167, but falling US rates as we expect sees that

fair value fall to 155 over time.

Masayuki Inui

Economist

Morgan Stanley & Co. LLC

Diego Anzoategui

Economist

Martin W Tobias, CFA

Strategist

Morgan Stanley MUFG Securities Co., Ltd.+

Sho Nakazawa

Equity Strategist

Stay O/W on the TOPIX despite the FX intervention; the bigger risks come from a

Morgan Stanley Asia (Singapore) Pte.+

global slowdown, geopolitical escalation, and/or higher energy prices.

Jonathan F Garner

Equity Strategist

Please add me to your distribution list.

Click here for our Bloomberg Ticker Almanac.

Daniel K Blake

Equity Strategist

Morgan Stanley MUFG Securities Co., Ltd.+

Kazuya Hayashi

Equity Strategist

Morgan Stanley & Co. LLC

Matthew Hornbach

Strategist

Morgan Stanley does and seeks to do business with

companies covered in Morgan Stanley Research. As a result,

investors should be aware that the firm may have a conflict of

interest that could affect the objectivity of Morgan Stanley

Research. Investors should consider Morgan Stanley

Research as only a single factor in making their investment

decision.