Goldman Sachs cuts USD/JPY forecasts amid Bank of Japan tightening

Goldman Sachs has significantly lowered its USD/JPY exchange rate forecasts, citing a strengthening case for the Japanese yen driven by Bank of Japan (BOJ) policy tightening. The bank's new 12-month target is 150, down from a previous forecast of 165. Short-term targets have also been adjusted to 158 for three months and 155 for six months.

Analysts suggest that as the BOJ becomes more aggressive, the risk of carry trades unwinding increases, particularly if Japanese investors begin repatriating capital. Goldman Sachs views the yen as a potential hedge against recession risk and notes that potential interventions from Tokyo could cap dollar gains.

In the broader foreign exchange market, recent volatility has tested liquidity. On July 30, 2026, USD/JPY saw approximately $158 billion in total volume, including a decade-high $102 billion in JPY spot volume and record-breaking JPY futures volume. These market shifts highlight the ongoing evolution of FX liquidity and the efforts to de-fragment the market through tools like FX Spot+.