Goldman Sachs weighs in on the trajectory of the USD/JPY currency pair, focusing on its correlation with US yields and the potential risks and factors influencing its direction.

Key Insights:

1. Yen's Usual Behavior: Historically, even in the absence of a surge in US yields, the Yen typically weakens when risk remains relatively supported. This trend aligns with a sustained US growth scenario, even as there's a continuation in disinflation despite rising international concerns.

2. Spillover Concerns: The bank acknowledges the escalating risk of economic spillover, which can affect currency trends.

3. Short-Term Tactical View: Goldman Sachs recognizes the potential for a slight fading in the recent fixed income sell-off. This might allow the USD/JPY to slightly dip in the short-term.

4. Medium-Term Outlook: However, when taking a broader lens, the expectation is that US interest rates will predominantly stay elevated for an extended period.

Conclusion: Goldman Sachs acknowledges that considering these factors, there could be upward risks to their current 3-month forecast for the USD/JPY, which pegs the cross at 140. The bank's stance revolves around the interplay between US yields, economic risks, and sustained US growth.