Goldman Sachs expects the yen to strengthen to 150 per dollar over the next 12 months, reversing the bearish position it adopted in July.

Goldman Sachs believes that a shift in Japan's domestic policy and the potential repatriation of funds back to Japan have improved the outlook for the yen.

Goldman Sachs strategist Karen Reichgott Fishman lowered her 12-month USD/JPY forecast from 165 to 150, while also cutting her 3-month and 6-month projections to 158 and 155, respectively.

In her report, she stated that the revision primarily reflects a faster pace of interest rate hikes by the Bank of Japan, as well as the growing likelihood of Japanese capital flowing back into domestic assets.

Fishman noted that a quicker pace of rate increases weakens the inflationary impact of expansionary fiscal policy and also reduces downward pressure on the yen.

Although a shift in portfolio fund flows remains speculative, the rising possibility of such a shift exposes the USD/JPY exchange rate to asymmetric downside risks.

Previously, Bank of America also raised its yen exchange rate forecast, projecting that the currency would strengthen to 149 per dollar by the end of the year.

The yen briefly rose to 158.28 against the dollar on Friday.

Japanese Finance Minister Satsuki Katayama said that U.S. President Donald Trump expressed concern about the yen's weakness during his meeting with Japanese Prime Minister Sanae Takaichi.