Economists at MUFG continue to see a lower USD/JPY as the most likely scenario.

JPY strength will be more than just about the Fed

“The scale of easing now priced for this year (Dec ’23 fed funds future at 4.10%) leaves the US dollar vulnerable and we are likely to see USD/JPY trading down to the YTD lows between 127-128 relatively quickly.”

“The monthly trade data in Japan for the month of February indicated the reversal of that negative terms of trade shock is well under way in Japan. The February import bill for fuel and minerals totalled JPY 2,577bn. The peak total for imports was back in August when natural gas prices peaked with the total import bill at JPY 3,423bn.” 

“Understandably, the Fed and the drop in yields in the US is getting the attention as a key factor in pushing USD/JPY lower but the energy story will certainly add to positive JPY momentum this year.”