Goldman Sachs Cuts Yen Forecast to 165, Bullish on Carry Trade
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Goldman Sachs cut its one-year yen forecast from 155 to 165, making it one of the most bearish major banks on the currency; with rate differentials still widening, the yen's decline has no clear turning point in sight.
Why did Goldman just slash its yen forecast this sharply?
Goldman moved its one-year USD/JPY forecast from 155 to 165 and raised its three- and six-month targets to 162 and 163 (from 160 and 158).
This means → Goldman sees yen weakness not as a blip but as structural — the further out you look, the worse it gets.
Three forces are stacking up: rising Japanese fiscal pressure, U.S. Treasury yields staying "higher for longer," and the Bank of Japan hiking only slowly.
In plain terms = Japan's rates are too low, U.S. rates are too high, and Tokyo is still spending — all three lines push the yen down at once.
How weak is the yen right now?
As of the Asian morning session, the yen traded at 161.79 per dollar, down 0.3% from the prior session — near its weakest level since 1986.
The yen is one of the worst-performing major currencies over the past year.
FX options markets price in roughly a 72% probability that USD/JPY hits 165 by next June.
This reflects something bigger than one bank's call — most traders are already betting the yen keeps falling.
What is the "carry trade" and why does Goldman like it?
A carry trade — borrowing in a low-rate currency to buy higher-yielding assets — works when the rate gap is wide. Japan's ultra-low rates make the yen very cheap to borrow.
Goldman explicitly backs yen-funded carry trades. This means → the bank expects the U.S.–Japan rate gap to stay wide, keeping the "borrow cheap, earn more" window open.
Hedge funds ramped up yen short positions last month to the highest level since 2017.
In plain terms = smart money isn't just bearish on the yen — it's actively borrowing yen to make money elsewhere.
Can Japanese government intervention turn this around?
Goldman strategist Karen Reichgott Fishman wrote: "Japan's Ministry of Finance reportedly may drop pre-intervention warnings, which could suppress volatility for a time, but the fundamental drivers of yen weakness remain."
This means → official intervention can spark a short-term bounce at best, but as long as the rate gap persists, fundamentals will pull the yen back down.
Bloomberg strategist Mark Cranfield noted that even a partial reversal of 1980s-era USD/JPY moves would push the pair into a higher trading range.
This signals a deeper shift: markets no longer treat Tokyo's intervention as a trend-reverser — just a brief pause for breath.
Content is for reference only, not financial advice.