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Mar 11 - 09:55 AM

Goldman Sachs: Expect Limited JPY Rally Post-BoJ Policy Shift; Here is Why?

By eFXdata  —  Mar 11 - 08:52 AM


Goldman Sachs addresses the increasing likelihood of the Bank of Japan (BoJ) moving away from negative interest rates, amid expectations set by recent news reports. However, these reports also suggest BoJ's continued worries about slowing economic momentum and inflation. While an exit from negative rates seems more probable in the near term, Goldman Sachs anticipates a diminished chance for a significant tightening cycle. The firm believes that simply ending negative rates won't be sufficient to trigger substantial repatriation by Japanese investors or significantly alter the Yen's trajectory, given the anticipated risk-friendly macroeconomic environment.

Key Points:

  • BoJ's Expected Policy Adjustment: Emerging reports suggest a nearing BoJ departure from negative interest rates, coupled with potential new quantitative easing targets.
  • Concerns Over Economic Momentum: Despite potential policy shifts, the BoJ remains apprehensive about the Japanese economy's weakening growth and inflation pace.
  • Impact on JPY: Goldman Sachs argues that the expected policy shift alone won't likely lead to notable JPY strength, due to limited repatriation and the Yen's negative correlation with a risk-on macro backdrop.


As the Bank of Japan gears up for a possible exit from its negative interest rate policy, Goldman Sachs predicts that the impact on the Japanese Yen might be more muted than some anticipate. The transition, while significant, is not expected to trigger extensive repatriation flows or counter the Yen's inherent characteristics in a risk-on market scenario. Investors should therefore temper expectations for a sustained rally in the Yen solely based on BoJ's policy adjustments.

Goldman Sachs Research/Market Commentary


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