Yen Recovery Against the Dollar: Catalysts Analysis According to Morgan Stanley

GasOptimizer · 2026-02-22T11:13:22+00:00

A Morgan Stanley highlighted that the yen could appreciate against the dollar due to political factors in Japan and a potential American economic weakness, creating a favorable scenario for investors.

GasOptimizer

2026-02-22 11:13:22

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Morgan Stanley recently pointed out that the yen against the dollar shows potential drivers for a scenario reversal in the coming months. According to the analysis released by Jin10, multiple political and economic factors could significantly contribute to strengthening the Japanese currency against the US dollar. The institution identifies that a shift in market sentiment regarding Japanese fiscal policies is crucial for this currency transformation.

Political Factors Ease Concerns Over Fiscal Expansion

One of the main drivers for the yen’s recovery is the easing of market concerns about Japan’s fiscal expansion. Recent political developments in the country, including the ongoing election process, suggest that the Liberal Democratic Party is likely to maintain its dominant position. Prime Minister Sanae Takaichi has adopted a more moderate stance on reducing the consumption tax, signaling greater fiscal awareness.

Morgan Stanley indicates that if there is increased discipline in fiscal policies and rhetoric from the government, it could significantly alleviate market anxieties. This shift in political narrative is essential to restore international investor confidence and consequently boost the yen’s strength against the dollar.

Global Dynamics: Weakening Dollar and Geopolitical Risks

In addition to domestic factors, Morgan Stanley’s analysis also highlights possible external drivers that could affect the yen-dollar dynamics. A potential weakening of the US economy, which would naturally lead to dollar depreciation, could serve as a catalyst for the appreciation of the Japanese currency. The institution also points out that future US tariff measures pose a geopolitical risk capable of amplifying this currency movement.

The convergence of these factors—both related to the consolidation of Japanese fiscal policies and the fragility of the US economy—creates a potentially favorable scenario for investors betting on the yen’s recovery against the dollar in the coming quarters.

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