Goldman Sachs forecasts yen to weaken to 165 per dollar in a year, signaling trouble for risk assets
The investment bank sharply revised its USD/JPY targets upward, citing persistent US yield advantages and Japan's fiscal strains.
Goldman Sachs just moved the goalposts on the yen, and not in Japan’s favor. The investment bank now expects the USD/JPY pair to hit 165 within twelve months, a significant jump from its previous target of 155.
The revised forecast reflects what currency traders have been watching play out in real time: the yen has been trading above 160 against the dollar since early June 2026, weighed down by a stubborn interest rate gap between the US and Japan. Goldman’s new three-month target sits at 162, with the six-month projection at 163, both revised upward from earlier estimates of 160 and 158, respectively.
Why Goldman turned more bearish on the yen
US yields remain elevated, the Federal Reserve isn’t rushing to cut rates, and the Bank of Japan is taking a gradual approach to tightening monetary policy. Goldman’s analysts point to limited US recession risks in the near term, which keeps the Fed from feeling any urgency to slash rates. Meanwhile, Japan faces ongoing fiscal strains that constrain how aggressively the BoJ can move without destabilizing its own bond market.
The bank’s previous forecasts had already anticipated yen weakness persisting above 150, driven by fiscal and growth differentials between the two economies.
Former Bank of Japan policymaker Sayuri Shirai stated on June 23, 2026, that the yen could weaken toward the 163-165 range if the Federal Reserve decides to raise rates this year.
The intervention question nobody wants to answer
Market sentiment indicates a reluctance to assume that currency intervention could effectively reverse the current trend of yen depreciation. Even if Japanese authorities intervene and temporarily strengthen the yen, the underlying forces driving it weaker — the yield gap and fiscal imbalances — remain unchanged.
What this means for crypto and risk assets
The yen carry trade has historically been one of the most important mechanisms connecting Japanese monetary policy to global risk appetite. Investors borrow cheaply in yen and deploy that capital into higher-yielding assets elsewhere, including US equities, emerging market bonds, and digital assets.
The July 2024 yen carry trade unwind offers a recent case study. When the BoJ unexpectedly hiked rates, the resulting yen strengthening triggered a rapid unwinding of leveraged positions across global markets. Bitcoin dropped sharply in the aftermath, not because of any crypto-specific catalyst, but because global risk appetite evaporated overnight.
The gap between Goldman’s old 155 target and its new 165 target represents a meaningful shift in how one of the world’s most influential banks views the currency landscape. A 10-yen revision in a single update suggests the forces driving yen weakness are more durable than previously assumed.