Why did the Japanese yen collapse in 2026?

The article argues that the Japanese yen’s plunge to near 40-year lows is being driven less by fiscal concerns and more by the Bank of Japan’s still-accommodative monetary policy and negative real rates. BCA Research says inflation expectations, a steep Japanese yield curve, and persistent carry trades funded in yen have kept pressure on the currency. The report expects both the yen and Japanese government bonds to remain weak through the end of 2026, but also sees a potential turning point later this winter as the yen becomes deeply undervalued and BoJ policy may eventually turn more hawkish. A sharp reversal could also be triggered if volatility rises or authorities intervene. Overall, the near-term outlook remains bearish for USD/JPY lower yen strength is not yet confirmed, but the setup suggests eventual mean reversion risk.