Goldman cuts USD/JPY forecasts, sees 150 in a year as BOJ tightening boosts yen case
Goldman Sachs has revised its USD/JPY forecasts significantly downward, now expecting a move to 150 within a year, a cut that carries substantial implications for market positioning and speculative activity. Per the full note by Eamonn Sheridan, the updated targets (158 for three months, 155 for six months) signal an increased confidence in the Bank of Japan's tightening cycle, which is expected to support the yen as Japanese investors potentially repatriate funds. In light of recent price action pushing USD/JPY towards 160, this development offers bullish cover for the yen amidst a broader trend of improving Japanese economic conditions.
What the desk is arguing
Goldman Sachs has lowered its USD/JPY price targets, now projecting 158 in three months, 155 in six months, and 150 in twelve months, down from 162, 163, and 165 respectively. The bank underscores that a more aggressive stance from the BOJ could enhance the yen's appeal, particularly as they observe rising odds of Japanese capital inflows. Their strategic focus suggests that long yen positions can serve as a hedge against recessionary pressures.
The note highlights significant shifts in carry trade dynamics, especially with Japanese investors potentially reallocating capital back home. This is expected to increase market volatility, particularly in positions that rely on borrowing yen to invest in higher-yielding assets, marking an important pivot for the broader FX landscape.
Where it sits in our coverage
Presently, our consensus forecast for USD/JPY stands at 152.0, with a range between 147.0 and 162.1, demonstrating a tighter outlook than Goldman's new targets. Specific firms consistently aligning with or closely mirroring Goldman's revisions include: - bofa: Dec-26 target 149.0 - morganstanley: Dec-26 target 140.0 - socgen: Dec-26 target 160.0
This is a significant divergence from the consensus where Goldman Sachs' perspective leans towards the lower end of the spectrum.
How other firms see it
Groups such as socgen, which has a relatively aggressive Dec-26 target of 160, align within a framework of expecting further yen strength, however, firms like morganstanley and bofa remain firmly at odds, predicting more pronounced weakness in the yen. This suggests a split sentiment across the market concerning influence of BOJ policy changes on future movements.
The anticipated normalization of BOJ policies creates significant cross-correlation with other currency pairs, particularly EUR/JPY and AUD/JPY, which are susceptible to shifts in Japanese monetary policy and capital flows. These pairs should be monitored closely as they will reflect the impact of the shifting stance in monetary policy.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Goldman Sachs has downgraded USD/JPY targets to reflect a strengthening yen driven by BOJ policy adjustments.
- 02Market risks in carry trades may emerge if Japanese investors begin repatriating funds.
- 03Goldman’s stance presents a bearish outlook for USD/JPY, contrasting with several other firms still maintaining more bullish expectations.
- 04Focusing on the yen as a recession hedge, suggests strategic shifts for traders in related currency pairs.
Market implications
Traders should particularly monitor USD/JPY around the psychological 150 level. As carry trade exposure shifts, it will be crucial to assess potential volatility spikes in response to any BOJ interventions or unexpected economic data from Japan.
Risks to this view
The primary risk to this bearish call centers on the BOJ’s response to inflationary pressures; a more robust than expected tightening could accelerate unrealistic dollar strength against the yen, posing a threat to Goldman's outlook. Additionally, any sudden shifts in global risk sentiment may also lead to rapid unwinding of positions.
EUR/USD — All Desk Targets
| Firm | Stance | YE 2026 |
|---|---|---|
Bank of America | Bullish | 1.1500 |
Scotiabank | Bullish | 1.1700 |
ANZ | Bullish | 1.1700 |
A 15-yen cut to a 12-month target from one of the most influential desks carries weight. It gives yen bulls cover just as USD/JPY pushes towards 160. The bigger risk for the market is to carry trades: if Japanese investors really do start moving money home, positions that borrow in yen to buy higher-yielding assets could unwind quickly.
Goldman choosing to sell EUR/JPY rather than USD/JPY suggests it still respects the support that high US yields give the dollar in the near term. For Australian traders, AUD/JPY faces a double headwind, from a stronger yen and from the BOJ narrowing the rate gap with the RBA . Any fresh intervention from Tokyo would be the fastest route towards Goldman's lower targets. --- Earlier: Daiwa sees next BOJ rate hike in December as Ueda signals shift in policy phase --- In July, Goldman said only a more aggressive BOJ would stop the yen's slide.
Now the BOJ is getting more aggressive, and Goldman has cut its USD/JPY targets and recast the yen as a hedge against recession. Summary: Goldman Sachs cut its USD/JPY forecasts to 158 (three months), 155 (six months) and 150 (12 months), from 162, 163 and 165 Faster BOJ tightening is seen offsetting the inflationary effect of Japan's expansionary fiscal policy Goldman sees rising odds of Japanese investors shifting money back home, although that remains largely speculative It sees long yen positions as especially useful as a hedge against recession risk The threat of further intervention is expected to cap the dollar's gains against the yen Tactically, Goldman favours selling the euro against the yen Goldman Sachs has cut its USD/JPY forecasts across the board, Sina Finance reported. The bank argues that an improving policy backdrop in Japan and the prospect of Japanese money returning home have strengthened the case for owning the yen.
Strategist Karen Reichgott Fishman now sees the pair at 158 in three months, 155 in six months and 150 in 12 months, down from previous targets of 162, 163 and 165. The revision is a marked reversal. As recently as July, Goldman had raised those same forecasts and stood among the most bearish voices on the yen.
It cited persistently high US yields, low US recession risk, Japanese fiscal concerns and only gradual tightening from the Bank of Japan. At the time, the bank said the dollar's climb against the yen was unlikely to stop without a US growth shock or a more aggressive BOJ. The second of those conditions has moved into view.
The BOJ raised its policy rate to 1.25% this month, and Governor Kazuo Ueda declared a shift in the policy phase, with the focus now on keeping inflation stable at 2% rather than pushing it higher. Fishman argues that faster BOJ hikes help offset the inflationary pull of expansionary fiscal policy. They also make it more likely that Japanese investors will move their portfolios back into domestic assets.
Sources & References
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