Free Trial

Goldman Sachs: Pondering An Early Exit


Goldman Sachs note that “the BoJ’s apparent greater flexibility on current monetary policy has shifted the balance of risks further in favour of the JPY and has helped drive USD/JPY lower in recent weeks on top of the softer-than-expected inflation news in the U.S.”

  • “How much lower could USD/JPY go in a scenario of a nearer-term exit from YCC? We have long been arguing that the bigger driver of the cross should be U.S. rates rather than domestic monetary policy, though our estimates suggest we could see another USD/JPY sell-off of roughly 3% - or a decline to levels just below Y125.”
  • “While our economists expect the BoJ to keep YCC in place with possible further tweaks to improve its sustainability, the increased risk of a complete exit means we see more limited room for USD/JPY upside and, as a result, recently revised down our forecast path.”
  • “That said, our economists’ base case outlooks for the U.S. and Japan in the year ahead - i.e., no U.S. recession, higher U.S. rates, and no BoJ exit from YCC - together still argue for phases of JPY weakness before a more sustained period of appreciation, likely once the peak in U.S. rates becomes clear.”
MNI London Bureau | +44 0203-865-3809 |
MNI London Bureau | +44 0203-865-3809 |

To read the full story



MNI is the leading provider

of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.

Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.