Japan's Bankruptcy Toll Climbs as the Yen Hovers Near a 40-Year Low and Goldman Sachs Revises Its Forecasts Higher

Since the yen broke through a 40-year low against the dollar in late June, the situation has not stabilized. It has calcified. As of July 5, 2026, the currency sits near 161.57 per dollar, according to CNBC, just off the 162.84 level it touched the prior week.

Goldman Moves the Goalposts — Upward

Goldman Sachs revised its dollar-yen forecasts this past week, and the direction was unambiguous. The bank now projects the pair at 162 in three months, 163 in six months, and 165 in 12 months. Its prior targets were 160, 158, and 155, meaning Goldman has moved every single forecast window in the yen's disfavor.

The reasoning is structural, not speculative. Goldman cited "higher-for-longer U.S. yields, low recession risk, lingering fiscal concerns, and only gradual Bank of Japan hikes" as the durable forces pushing USD/JPY higher. The bank added that Japan's own fiscal stimulus plans risk pushing up domestic bond term premiums relative to U.S. Treasurys, a dynamic that has historically accompanied further yen weakness.

Goldman also threw cold water on intervention hopes. Previous Bank of Japan interventions, the bank noted, only temporarily interrupted the yen's slide before the trend resumed. "We see no reason for the upward trend in USD/JPY to stop without an unexpected negative U.S. growth shock or a BoJ pivot towards more aggressive policy tightening," Goldman wrote.

The Fed Is the Other Half of This Equation

The June U.S. jobs report, released last week, complicated matters on the dollar side. Job growth slowed sharply, and CNBC reported the dollar clocked its biggest weekly drop since April in the aftermath. The dollar index fell to around 100.9 in early Monday trading.

But strategists at OCBC pushed back on the idea that dollar weakness would persist. They noted the unemployment rate actually declined, pointing to a still-tight labor market, and maintained their forecast of a "moderate 2-3% appreciation in the dollar in the second half of 2026."

Peter Tchir of Academy Securities, writing via ZeroHedge, argued the Fed will cut rates in September, citing a jobs report where "headline plus revisions was negative, the private sector underwhelmed, and unemployment only dropped because the labor force participation rate dropped by a relatively large 0.3%." Tchir also flagged alternative inflation trackers, including the Cleveland Fed's rent metrics and the Truflation index, as suggesting official inflation figures are currently overstated, a case for cuts, not hikes.

Strategists at Commonwealth Bank of Australia noted the Fed meeting minutes, due this week, may offer less guidance than usual, citing Fed Chair Kevin Warsh's stated view that the central bank has historically provided too much forward guidance.

Companies Are Failing. Small Ones Especially.

Yen weakness has crossed from financial story to economic crisis, as shown by the bankruptcy data. Tokyo Shoko Research reported that 45 Japanese firms filed for bankruptcy citing currency weakness in the first half of 2026, up more than 30% from the same period a year earlier and the highest figure since the data firm began tracking currency-related bankruptcies in 2022, according to ZeroHedge citing Bloomberg.

These are not the large exporters who benefit when their overseas revenue converts back at a favorable rate. These are the smaller firms: importers, domestic manufacturers, businesses running on thin margins who pay for raw materials and energy priced in dollars. They employ the majority of Japan's workforce.

The feedback loop ZeroHedge identified merits serious attention. Japanese life insurers and financial institutions, having built profitable positions in unhedged foreign assets over the past two years, have little incentive to change course. Real short-term rates in Japan remain negative. And there is a political constituency inside the Liberal Democratic Party, under Prime Minister Sanae Takaichi, that is perceived to prefer weak-yen conditions because they flatter the earnings of Japan's major exporters.

The Case for Tokyo Acting

The strongest argument for a policy shift is the bankruptcy data. Forty-five firms is a data point; tens of thousands of employees is a political reality. Japan has intervened before, most recently with what CNBC described as a "sudden surge in buying" on Thursday of last week that briefly lifted the yen before traders pushed it back down.

Marc Chandler, chief market strategist at Bannockburn Global Forex, told CNBC the options market shows large capital pools have bought short-dated dollar puts as hedges against intervention risk. Sophisticated money is already pricing in the possibility of a BOJ move, even if the consensus view is that any such move would be temporary.

OCBC strategists were direct about the limits: "Without a meaningful shift in underlying macro fundamentals, verbal warnings and outright intervention alone are unlikely to change the broader direction of the pair."

The Unresolved Question

Goldman Sachs also disclosed it continues to favor using the yen "as a funder for high-carry EM expressions," meaning the bank is actively recommending clients borrow in yen to invest in higher-yielding emerging market currencies like the Indian rupee and Colombian peso. That trade works as long as the yen keeps weakening. If the Bank of Japan does pivot to more aggressive tightening, it would not just move USD/JPY. It would unwind a massive global carry trade with consequences well beyond Tokyo. Whether the BOJ's gradual posture can hold as the domestic bankruptcy count climbs remains the unresolved question.