Executive Summary
USD/JPY trades at 157.63 (rising USD/JPY = JPY weakening), placing the yen near the 93rd percentile of its 52-week range (139.88–159.46) and at an all-time low on the BIS Real Effective Exchange Rate of 67.73 — roughly 40% below OECD purchasing power parity of ~¥95. The yen has weakened +3.2% over the past month and +6.8% over twelve months, driven by the persistent US-Japan rate differential of ~275bps (Fed Funds 3.625% midpoint vs BoJ 0.75%) and the Iran conflict's asymmetric impact on Japan's energy-dependent economy. The central tension is between the yen's extreme structural undervaluation and approaching BoJ normalisation on one side, and the wide carry differential and acute terms-of-trade shock from Middle East energy disruptions on the other. With fiscal year-end repatriation flows (March 31), super central bank week (March 17–19), and Shunto wage results imminent, the tactical picture favours modest JPY strength (bullish JPY) on positioning clean-up and seasonal flows, while the strategic outlook is more constructively bullish JPY as the BoJ rate path toward 1.00–1.25% narrows differentials — though PM Takaichi's dovish board nominations and fiscal expansion cap the pace of appreciation.