Goldman's Yen-Yawn Forecast Hits 165: Hedge Funds Load the Carry Trade, Bitcoin Watches 🪙

Goldman Sachs has revised its yen forecast lower, projecting USD/JPY at 165 within twelve months, up from its previous 155 target and among the most bearish calls on Wall Street. The yen has already slumped to its weakest level against the dollar since 1986, making it one of 2026's worst-performing major currencies. Strategist Karen Reichgott Fishman attributed the downgrade to higher-for-longer US yields, a low risk of US recession, Japanese fiscal pressure, and gradual BoJ tightening.

The bank also sharpened its shorter-dated calls, now seeing USD/JPY at 162 in three months and 163 in six months, revised from 160 and 158, respectively. Goldman expects any official Japanese intervention to have only a temporary effect, stating, "we see no reason for the upward trend in USD/JPY to stop without an unexpected negative US growth shock or a BoJ pivot towards more aggressive policy tightening." The bank tied continued dollar firmness to the US artificial intelligence investment boom and energy supply strains, while trimming its euro forecasts and striking a more optimistic tone on the Indian rupee and Colombia's peso.

Positioning data has reinforced the bearish view. Hedge funds pushed bearish yen bets to the highest level since 2017 last month, and traders assign roughly a 72% chance that USD/JPY reaches 165 by June 2027, according to Bloomberg. Goldman also expects the dollar to stay firm against most peers as AI-related capex keeps US yields elevated and energy markets remain tight.

The yen weakness is drawing renewed attention from crypto markets because of the carry trade channel, in which investors borrow in low-yielding yen to fund purchases of higher-yielding or risk-on assets. Bitcoin ($BTC) has climbed back above $63,000 in recent sessions amid July seasonality and Fed-driven liquidity, with analysts at multiple outlets flagging the possibility that further yen-funded carry into digital assets could amplify the move if Goldman and other macro desks continue to lean bearish on JPY.

The Japanese yen traded at 162.15 per dollar in early Asian trading on Monday, up nearly 0.3% from the previous session, even as Goldman and its peers project the pair moving another 300 pips higher over the coming year. Tokyo's Ministry of Finance remains focused on the currency market, but Goldman does not expect a sustained defense to break the trend absent a sharp US growth shock or a more aggressive BoJ pivot.