Core Viewpoint - Goldman Sachs strategists predict that the Japanese yen may rise to the 100 level against the US dollar within the next decade as Japan's monetary policy gradually normalizes, indicating a potential reversal of the long-term depreciation trend of the yen [1][3] Group 1: Economic Context - The report led by Kamakshya Trivedi suggests that the prediction is not as aggressive as it appears, considering the imminent exit from ultra-loose policies such as yield curve control [1] - Since the implementation of negative interest rates by the Bank of Japan in 2016, the yen has been in a structurally weak position, leading to capital outflows and supporting Japanese export companies while boosting domestic stock markets [1] Group 2: Historical Trends - Historical experience indicates that even when the yen is long-term misvalued, it tends to gradually return to fair value, as seen between 2020 and early 2021 when the yen strengthened due to rising global risk aversion and falling US Treasury yields before entering a depreciation phase again [3] - Despite Prime Minister Fumio Kishida's support for loose monetary policy and fiscal expansion plans, which are seen as short-term negative factors for the yen, there is increasing political opposition to inflation within Japan, suggesting that any return to "Abenomics" would be more moderate in intensity [3]

Core Viewpoint - Japan's inflation rate remains persistently high, exceeding policy targets, while the central bank maintains a cautious stance on interest rate hikes, raising questions about the effectiveness of its monetary policy [1][2] Group 1: Monetary Policy Insights - The former Governor of the Bank of Japan, Shirakawa Masaaki, attributes the current monetary policy stance to two main factors: the core inflation rate being below 2% and uncertainties arising from U.S. tariff policies [1] - Shirakawa expresses skepticism about the explanation of Japan's economy and inflation, noting that inflation has been above 2% for the past three years, suggesting that the core inflation rate should not still be below this threshold [1] - Concerns about potential negative reactions in financial markets contribute to the Bank of Japan's cautious approach to monetary policy, as the long-standing zero interest rate policy may have led to accumulated risks in the financial system [1] Group 2: Currency and Economic Competitiveness - Shirakawa highlights that the depreciation of the yen has led to inflation, which in turn weakens actual potential income, contributing to ongoing weak consumer spending [1] - The former President of the Asian Development Bank, Nakao Takehiko, argues that the Bank of Japan should accelerate the normalization of its monetary policy to strengthen the yen and halt its depreciation [1] - Nakao believes that a stronger yen would be more beneficial for Japan's economy, countering the notion that a weaker yen enhances competitiveness and helps escape deflation [1][2] Group 3: Economic Recovery Strategies - Nakao identifies the excessive weakness of the yen as a key issue harming the economy, suggesting that a more effective approach would involve returning service, product, wage levels, real estate, and GDP to reasonable pricing [2] - The focus should be on raising price levels to stimulate economic revitalization rather than relying on the attractiveness of a "cheap" yen to draw tourists [2]