We look for USD/JPY to consolidate around the current levels into year-end.

Looking to 2024, we think USD/JPY might not fall until rate cuts by the Fed look imminent, perhaps in the middle of the year. 

We expect the Fed to start easing in 3Q24. 

We expect the BoJ to scrap Yield Curve Control (YCC) in 1Q24 and step out of Negative Interest Rate Policy (NIRP) in 3Q24. 

The anticipated policy contrast between the Fed easing and the BoJ normalising should allow USD/JPY to fall in a more sustainable way. However, considering that the yield gap will likely remain large, we only expect a moderate decline in USD/JPY.