Goldman: Under Pressure

Goldman Sachs note that they “have argued that there appear to be few barriers to further JPY depreciation in the near-term risks still skewed to the upside on U.S. terminal rate pricing and a BoJ that appears steadfast in sticking with its current YCC policy. Neither of those factors have changed, even though we would argue that the risks to front-end pricing look more balanced than in the weeks leading up to Jackson Hole.”

• “The main question from here is if USD/JPY at higher levels in the coming months could prompt direct FX intervention or an earlier-than-expected shift in BoJ policy.”
• “Direct intervention still seems less likely to be effective without any signal of an imminent BoJ policy change.”
• “For now, we remain comfortable with our bearish JPY view even after the latest move, but we think that the debate around the risks of intervention and a possible monetary policy shift will become increasingly in focus as we hit higher levels (particularly if the Japan inflation outlook continues to strengthen).”