Goldman Sachs raises dollar-yen forecast, predicts yen weakness will persist through 2027

Goldman Sachs just told the world to expect more pain for the Japanese yen. The bank’s updated forecasts project the dollar-yen exchange rate climbing to 162 in three months, 163 in six months, and 165 within a year.

The yen is already trading near 40-year lows against the dollar, hovering around the 161.8 to 162.8 range. Goldman is essentially saying: it gets worse from here.

Why the yen keeps sliding

The story behind the yen’s decline comes down to interest rate differentials. US Treasury yields continue to offer a meaningful advantage over their Japanese counterparts, and Goldman sees no reason for that gap to close anytime soon.

The bank points to several factors keeping the pressure on. A limited risk of recession in the US means the Federal Reserve has little urgency to slash rates. Japan’s own fiscal challenges, including mounting government debt, constrain Tokyo’s options. And the Bank of Japan has been hiking interest rates at a pace best described as glacial.

Between April and May 2026, the Japanese government reportedly spent over 11 trillion yen intervening in currency markets, trying to put a floor under the yen’s decline. It barely made a dent.

The carry trade connection to crypto

The yen’s persistent weakness has supercharged one of the oldest trades in finance: the carry trade. Borrow money in a currency with low interest rates (the yen), convert it to a currency with higher rates (the dollar), and invest in assets that generate returns above your borrowing costs.

Yen-funded carry trades have been channeling capital into riskier assets, and increasingly those risk assets include Bitcoin and other cryptocurrencies. When the yen weakens, borrowers are effectively repaying their loans in a depreciating currency.

Carry trades work beautifully right up until the moment they don’t. If the Bank of Japan suddenly accelerates its rate hikes, or if some external shock causes the yen to snap back, the entire trade unwinds violently. Anyone who remembers August 2024 knows exactly how this plays out. A modest BOJ rate hike triggered a carry trade unwind that sent shockwaves through global markets, including crypto, as leveraged positions got wiped out.

Not everyone agrees with Goldman

Goldman’s forecast isn’t universal. J.P. Morgan has a 2026 USD/JPY target of 164, which aligns loosely with Goldman’s longer-term view. But ING projects the pair at 153, a dramatically different outcome that implies meaningful yen strength from current levels. That’s a gap of roughly 12 yen between two major banks’ forecasts.

The divergence boils down to differing views on BOJ policy. If the central bank surprises with faster-than-expected tightening, ING’s lower figure starts looking more plausible. If the BOJ continues its cautious approach, Goldman’s numbers are the ones to watch. Governor Kazuo Ueda has signaled willingness to normalize policy, but each step has been measured and deliberate.

What this means for crypto investors

Traders should watch a few key signals. Any hawkish shift in BOJ rhetoric could be an early warning. Currency intervention by Japan’s Ministry of Finance signals rising official discomfort with the yen’s level. And sharp, sudden moves in USD/JPY, particularly moves below 158, could indicate the beginning of a broader position unwind.

Goldman’s forecast rests partly on the assumption that the US economy avoids recession. If the Fed cuts rates more aggressively, the yield differential narrows, the yen strengthens, carry trades unwind, and risk assets face headwinds from multiple directions simultaneously. Goldman’s latest forecast suggests the pressure keeps building for at least another year.

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