Goldman Sachs: Japan Has $1 Trillion War Chest, More Yen Interventions Likely

According to Goldman Sachs, Japan holds close to $1 trillion in foreign exchange reserves, with about $200 billion in cash or cash equivalents, providing room for additional yen interventions. The yen slipped back toward 160 per dollar this week, erasing roughly half of last month's post-intervention gains.

Goldman strategist Karen Fishman noted that the Federal Reserve's FIMA repo facility could make the full reserve pool available without Japan needing to sell bonds. The real driver behind the yen's weakness is the interest rate gap: U.S. 10-year Treasury yields stood near 4.69% while Japanese 10-year government bonds yielded 2.839%, keeping capital flowing toward U.S. debt. Markets currently price a 65% chance the Bank of Japan raises rates in September; a miss on that hike could trigger renewed yen pressure and revive intervention bets.