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Mar 26 - 09:55 AM

Goldman: BoJ's Policy Shift Only a Small Step for JPY; Revising USD/JPY Targets Higher

By eFXdata  —  Mar 26 - 09:23 AM


Goldman Sachs analyzes the Bank of Japan's (BoJ) recent decision to exit negative interest rates, marking a significant policy move but with limited immediate impact on the Japanese Yen (JPY). The adjustment is deemed insufficient to counter the broader macroeconomic factors favoring USD strength. In response to the BoJ's cautious approach and revised expectations for the Federal Reserve's policy, Goldman Sachs has updated its USD/JPY forecasts to reflect a higher trajectory for the pair in the coming months.

Key Points:

  • BoJ's Historic Rate Hike: The BoJ's decision to raise rates for the first time in 17 years is viewed as a major policy shift but is anticipated to have a minimal effect on strengthening the JPY, given the prevailing global economic conditions.
  • Macro Backdrop Over Yen Dynamics: The broader macroeconomic environment, characterized by a benign risk landscape, is expected to exert downward pressure on the JPY over time, despite Japan's policy sensitivity to exchange rate fluctuations.
  • Revised USD/JPY Forecasts: Goldman Sachs adjusts its forecast for USD/JPY, predicting higher levels of 155, 150, and 145 over 3, 6, and 12 months, respectively, compared to previous projections. This revision is influenced by changes in the Fed's policy outlook and corresponding adjustments to US fixed income forecasts.


While the BoJ's exit from negative interest rates represents a noteworthy development in its monetary policy stance, Goldman Sachs anticipates that it will only have a marginal impact on the JPY in the short term. The firm's updated forecasts for USD/JPY signal expectations for continued USD strength against the JPY, driven by a confluence of global macroeconomic factors and policy adjustments in both Japan and the United States.

Goldman Sachs Research/Market Commentary


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