Goldman Sachs makes a 180-degree turn! Yen 12-month target raised from 165 to 150

The outlook for the yen has undergone a major turning point. Goldman Sachs Group reversed the bearish stance it established in July this year, sharply raising its yen target, lifting its 12-month forecast from 165 to 150, citing accelerating domestic policy shifts in Japan and rising expectations of capital repatriation. Goldman Sachs strategist Karen Reichgott Fishman also raised her three-month and six-month yen targets in her latest report, adjusting them to 158 and 155, respectively, from previous levels. She pointed out that the Bank of Japan's faster pace of interest rate hikes and the increased possibility of domestic capital flowing back into Japanese assets together form the core DRIVE behind this major forecast revision. Supported by a combination of multiple positive factors, the yen briefly rose to a high of 158.28 per dollar on Friday. Japanese Finance Minister Satsuki Katayama previously revealed that U.S. President Trump expressed concern about the yen's weakness during a meeting with Japanese Prime Minister Sanae Takaichi, and this news also provided clear support for the yen. Policy Shift and Capital Repatriation: The Twin Pillars of the Bullish Case Fishman explained in the report that the Bank of Japan's accelerated pace of rate hikes has had two effects: on the one hand, it has curbed inflationary pressure brought about by expansionary fiscal policy, and on the other hand, it has correspondingly reduced pressure on the yen to depreciate. On the capital flow front, she noted that although the trend of domestic portfolio capital repatriation is still speculative at present, this possibility is rising, thereby creating "downside asymmetry" in the USD/JPY exchange rate and enhancing the yen's appeal as a portfolio hedging tool. "These developments increase the appeal of being long the yen, especially as a hedge against recession risk," Fishman wrote. Wall Street Institutions Accelerate Their Shift Toward the Bullish Camp Goldman Sachs is not the only major institution to have changed its stance. Bank of America had previously raised its year-end yen forecast to 149, in line with Goldman Sachs' direction. The successive forecast adjustments by two major Wall Street institutions show that the mainstream judgment on the yen's medium-term trajectory is undergoing a systemic shift. However, Goldman Sachs maintained a tactically cautious stance in the short term. Fishman said the bank currently prefers shorting EUR/JPY rather than directly going long USD/JPY, a strategic choice that reflects its judgment that there is still some uncertainty around recent dollar moves. Short-Term Caution, Long-Term Bullishness Despite the sharp upward revision to its medium- and long-term targets, Goldman Sachs made clear it remains cautious in near-term operations. This combined stance of "tactical caution, strategic bullishness" means that while investors grasp the direction of yen appreciation, they still need to pay attention to short-term volatility risks. The yen has now rebounded significantly from recent lows, and if the dual positive factors on the policy and diplomatic fronts continue to materialize, they may provide support for further strengthening of the yen. For global investors who include the yen in their hedging allocations, the signal sent by Goldman Sachs' shift this time deserves close attention. This article is reprinted from "Wallstreetcn", GMTEight editor: Feng Qiuyi.