Synopsis:

Goldman Sachs assesses the effectiveness of the recent Japanese Yen intervention, suggesting it provides only temporary relief given the prevailing negative macroeconomic fundamentals. They maintain a cautious outlook with the USD/JPY expected to stabilize around 155 in the near term.

Key Points:

• Intervention Impact: The intervention by Japanese authorities last week, though significant, is viewed primarily as a measure to buy time rather than a long-term solution. It helped realign the Yen closer to its fundamental value after a period of volatile trading.

• Economic and Monetary Outlook: Despite this intervention, the broader economic context continues to exert downward pressure on the Yen. Key factors include Japan's economic policies and the global interest rate environment, particularly the policies of the U.S. Federal Reserve.

• USD/JPY Forecast: Goldman Sachs forecasts the USD/JPY exchange rate to hover around 155 in the coming three to six months, with potential risks of a rise if the Fed delays or reduces expected rate cuts.

Conclusion:

While the recent intervention has stabilized the Yen temporarily, Goldman Sachs advises caution due to ongoing negative economic pressures. They suggest that the Bank of Japan may need to continue such measures unless there are significant changes in Japan’s economic conditions or global monetary policies.