Goldman Sees USD/JPY Rebound Despite Yen Strength

Key Moments

Market Reaction to Japan’s Snap Election

The outcome of Japan’s snap election aligned with expectations, as Takaichi and the ruling Liberal Democratic Party (LDP) secured a decisive landslide win. The result delivered what is described as a “supermajority,” further entrenching Takaichi’s mandate and political influence.

Despite the strong political outcome, the immediate response in the foreign exchange market has not mirrored that show of strength. Over the last two sessions, the Japanese yen has firmed, with USD/JPY trading lower by 0.4% at 155.30. The recent downside in the pair has been driven largely by verbal intervention from Japanese officials and rising concern that actual market intervention could follow, particularly after reports of earlier “rate checks” in prior weeks.

Goldman Sachs Outlook: Path Toward 160, With Intervention Risks

Goldman Sachs maintains a constructive view on further upside in USD/JPY, even as the pair has retreated recently. The firm argues that the post-election backdrop supports a renewed move higher, but emphasizes that any advance could be constrained or cut short by policy action from Japanese authorities.

In its assessment, Goldman Sachs highlights the political and fiscal implications of the election result:

“The ruling coalition has reportedly achieved a “landslide” victory in Japan’s snap lower house election, clearly signaling wide support for the direction of the new administration, including its focus on greater fiscal spending. While some initial polls had flagged this possibility, we view this as slightly stronger than expectations.”

The bank expects volatility to pick up as markets reassess the implications:

“We expect implied volatility to pick up again, with USD/JPY moving towards and through 160 as markets digest the full impact of the election results and the mandate for PM Sanae Takaichi. However, the move may be short-lived or even short-circuited if authorities push back through rate checks or actual intervention.”

ANZ Shares a Similar USD/JPY Scenario

Goldman Sachs is not alone in projecting renewed upside in USD/JPY. ANZ has outlined a similar path for the currency pair following the election outcome, focusing in particular on market expectations for Bank of Japan (BOJ) policy.

ANZ points to current market pricing for BOJ tightening and contrasts it with its own expectations:

“Markets are pricing in over 50 bps of BOJ rate hikes by the end of 2026. We think this is overdone, with April being the final 25 bps hike of the cycle in our view. Further inflation misses and cautious BOJ rhetoric may see this pricing reverse and likely drag the JPY lower.”

On that basis, ANZ also anticipates further gains in USD/JPY, conditional on the broader policy backdrop in the United States:

“Overall, we see USD/JPY continuing its march higher in the absence of any new US policy volatility. We continue to see risks of a move over 160 in the near-term.”

USD/JPY: Current Level and Strategic Views

With USD/JPY trading around 155.30 and the yen supported recently by official commentary and intervention concerns, both Goldman Sachs and ANZ still foresee a renewed upward trajectory for the pair. Their views center on the strengthened political mandate for fiscal expansion in Japan, BOJ rate expectations, and the potential for Japanese authorities to cap excessive yen weakness.