USD/JPY: Goldman Sachs aiming for 115 within 1 year and 108 within 3 months

Goldman Sachs on the BoJ decision:

"First, the objective of controlling the rate curve points to "infinite QE".

Second, the negative market reaction shows how feelings have reversed. The reality is that with inflation well below the target, markets have little patience for half measures.

Given these headwinds, we note three things:

First, there is much speculation that the fiscal stimulus will enable them to achieve the inflation target. We do not share that opinion. Only a substantial decline of the yen would enable this.

Secondly, we believe that the state of mind at the BoJ remains haunted by deflation.

Thirdly, we believe that the markets will punish this step by step approach by pushing the yen  up. If there is the impression that the BoJ will no longer proceed with aggressive monetary easing, it could bring the USD/JPY back below 100.

We believe that Japan has no other choice but to weaken the yen. We continue to expect 108, 110 and 115 within 3, 6 and 12 months respectively." says Goldman Sachs.