Goldman Sachs decides to change direction in Japanese yen projections

Goldman Sachs has changed its Japanese yen strategy, reducing its 12-month expectation for the dollar/yen exchange rate from 165 to 150 and renewing its short-term forecasts.

Reasons for the Strategy Change

While Goldman Sachs had previously forecast a weak yen, in its latest assessment it shifted direction and lowered its 12-month expectation for dollar/yen from 165 to 150. The Bank of Japan accelerating interest rate hikes and the possibility of Japanese investors repatriating capital to the country were decisive factors in this shift.

New Period Projections

According to the new projections shared by strategist Karen Reichgott Fishman, the bank also updated its short-term targets. Accordingly, the three-month dollar/yen forecast stands at 158, the six-month expectation has been revised to 155, and the one-year projection was set at the 150 level.

Central Bank and Capital Flow

Goldman Sachs emphasized that the Bank of Japan is tightening monetary policy more rapidly and stated that the steps taken have eased selling pressure on the yen. Additionally, the report included the scenario that Japanese investors could redirect their overseas assets back into the country, conveying this as a development in favor of the yen.

Market Outlook and Other Banks

Expectations for the strengthening of the yen were not limited to Goldman Sachs alone, as Bank of America previously announced its year-end dollar/yen expectation as 149. Following these developments, the dollar/yen parity dropped down to 158.28, while Goldman Sachs maintained a cautious stance in the short term and preferred a short position in EUR/JPY.