GS Reverses Yen Outlook, Sees ¥150 Per Dollar in 12 Months

Goldman Sachs has made a dramatic reversal in its yen forecast, predicting that the Japanese currency will strengthen to ¥150 per dollar over the next 12 months. This marks a significant departure from the bank's previous forecast of ¥165 issued in July. The revision reflects the Bank of Japan's (BOJ) aggressive rate hikes and the growing likelihood that Japanese capital parked overseas will flow back into domestic assets.

The BOJ raised its benchmark rate by 25 basis points to 1.25% on September 18th, signaling further tightening. This has helped offset inflationary pressures from expansionary fiscal policy while easing the burden of yen depreciation. The bank also cited the increased likelihood that Japanese investment capital will return to domestic assets as a key factor supporting the yen.

Goldman Sachs strategist Karen Reichgott Fishman noted that these shifts enhance the appeal of yen longs, making it an attractive portfolio risk-reduction tool, particularly if recession concerns intensify. The bank has maintained a cautious stance on near-term tactics, preferring to express yen strength against the euro rather than betting directly on dollar-yen weakness.