Goldman Sachs On JPY

The US bank states that current macro conditions are unlikely to be successful from an intervention standpoint (in turning the yen trend around), see below for more details.

Goldman Sachs: "Our baseline outlook of solid growth, gradual policy adjustments and upside risks to forward rates is a very negative mix for the Yen, even if global equities falter under threat of tighter monetary policy. The only question then is the extent to which Japan policymakers will push against Yen depreciation, but we think the tools are limited. Intervention is most successful when it is in line with the macro fundamentals, catches the market by surprise, and is coordinated. Right now, pushing against Yen depreciation would not meet any of those three criteria. The best outcome then is to slow the speed by reducing the currency's beta to other cyclical factors, and policymakers have been successful on this front so far, as markets clearly price an elevated risk of intervention. And as long as the currency is moving in line with other market variables, policymakers will likely be wary of stronger action since the threat of intervention seems to be “working.”

But if JPY continues to underperform other assets like it did on Friday, then the risk of actual intervention will rise materially. While the BoJ's policy stance has shifted slightly in response to ongoing currency pressure, despite waning inflation pressures, it would need to move much faster to keep up with the shifting fundamentals abroad. And we think recent BoJ officials' comments suggest they view gradual currency depreciation as somewhat helpful for achieving the inflation aim, so they are not actually trying to “keep up” to strengthen the Yen. Overall, while currency policy will remain top of mind, the fundamentals from global risk sentiment and domestic inflation dynamics continue to point to a weaker Yen. It would take a change in the global fixed income momentum to substantially alter that trend, as it did in 2022."