At present uncertainty as to whether the Fed really will initiate a rate cut cycle in mid-2024 is likely to be too high still. A soft landing of the US economy is still possible, and as a result, a weakening of USD might be limited for now.

If the economic data from the US will largely disappoint over the coming weeks and if dovish comments from Fed members increase significantly, rate cut speculations might intensify further, putting notable downside pressure on USD. However, that might be a while off and until then politicians in Japan will continue to watch the USD/JPY exchange rate nervously.