Summary
The dollar strengthened against the yen in February, with the USD/JPY passing 150 for the third time as expectations for the timing of a rate cut by the Fed shifted back and the BOJ sent new dovish cues. In the short term, we think expectations of a rate cut by the Fed are likely to be pushed back and upward pressure on the dollar will continue. In that regard, the USD/JPY looks poised to pass last year's high. Meanwhile, it seems increasingly likely that the BOJ will move to normalize policy at the monetary policy meeting in March. We see the possibility of a strong reaction to the move given no consensus has formed of the timing, measures, or outlook. Naturally, the yen is likely to weaken if the BOJ delays a policy shift.
