Goldman Sachs cut its yen forecast, now projecting USD/JPY at 165 within a year
(prior forecast 155), making it one of the most bearish institutions on the
currency. Strategist Fishman cited widening US‑Japan rate differentials,
Japanese fiscal pressure, elevated US Treasury yields and slow Bank of Japan
tightening as drivers of further yen weakness, even as the currency appears
deeply undervalued. Goldman raised its near-term USD/JPY forecasts to 162 in
three months and 163 in six months (previously 160 and 158). The bank said
official intervention would likely be short‑lived and the underlying causes of
depreciation remain. Hedge funds’ short positions on the yen hit a high not seen
since 2017 last month, and market-implied probability of USD/JPY at 165 by June
next year is about 72%. Goldman also favors using the yen as a funding currency
for carry trades.
