Forex strategists are anticipating a softer yen, suggesting the Bank of Japan's Friday meeting could disappoint investors with a less hawkish stance than markets currently expect. Wells Fargo is recommending short positions on the yen, while Citigroup forecasts the currency could slide to 159 against the dollar in the coming weeks.

Chris Turner, head of G10 FX strategy at ING Bank NV, projects the yen will weaken to the 157 or 158 level if the BOJ refrains from signaling additional rate hikes. Swaps traders have already priced in a near-certainty of a 25-basis-point rate increase at Friday's meeting. The market's attention now turns to Governor Kazuo Ueda's post-decision press conference, where his remarks will signal the likely future policy trajectory, with traders anticipating further tightening before year-end.

The yen edged up 0.1% to 156.15 against the dollar at 9:13 a.m. in Tokyo on Friday. "The bar for the BOJ to meet market expectations is very high, and clearing that hurdle is even more challenging," wrote Chidu Narayanan, strategist at Wells Fargo, in a Thursday report. "The risk leans toward a more dovish outcome than markets anticipate."

The yen has already weakened following the Federal Reserve's first rate increase in three years on Wednesday, with Chair Kevin Warsh signaling further monetary tightening to combat inflation. Earlier this month, the yen had strengthened notably, reaching its highest level since mid-February and surpassing the peak achieved after the rare joint intervention by the U.S. and Japan in late July.

In recent years, the yen has faced persistent pressure, mainly due to the substantial interest rate differential between Japan and other major economies. Should the BOJ fall short of market expectations, the yen faces near-term downside risks, though Citigroup strategist Daniel Tobon noted in a Thursday report that he views recent Japanese policy measures as part of a broader "institutional shift" that could support yen strength over the long term.

"We previously harbored significant concerns about the yen, but conditions are now gradually moving in the right direction," Tobon said. Georgette Boele, senior FX strategist at ABN AMRO, expects the yen to strengthen in the second half of 2027, when the Fed and the European Central Bank are projected to cut rates. For now, however, she anticipates the yen will trade around 154 against the dollar through the first quarter of 2027. "We expect rising energy prices to temporarily prevent a yen rebound," she added.