Summary
The USD/JPY peaked just before its 2022 high, falling by over 5 yen in a month as a shift in US monetary policy has come into view. We still see the possibility of a reversal given additional rate hikes cannot be ruled out, but the Fed's rate hike cycle appears to be in its final stages, and we expect it to start cutting rates in 2024. The timing could be unexpectedly fast if the Fed puts more emphasis on the economy than on prices. Meanwhile, we expect the BOJ to normalize monetary policy early next year. We expect it will end the negative rate policy, shifting back to positive rates. We expect yen sellers to lose confidence as this will undermine the assumption that procurement costs will remain low and that the yen will not rise. We expect the dollar to weaken against the yen in 2024 due to the narrowing of the disparity between monetary policy in Japan and overseas.
