Daiwa Securities: US-Japan policy expectations are tug-of-war, USD/JPY likely to remain volatile in both directions in the short term

(1) Daiwa Securities strategist Kenta Tadaide pointed out that economic fundamentals remain the key factor determining the USD/JPY trend. This week, U.S. inflation data will be released, and next week, both the Federal Reserve and the Bank of Japan will hold policy meetings, becoming the two major focal events in the market.(2) If U.S. inflation accelerates, it may prompt the Federal Reserve to adopt a more hawkish monetary stance, which would support the U.S. dollar. Meanwhile, rising expectations of further rate hikes by the Bank of Japan could increase upward pressure on the yen, with the two forces counterbalancing each other.(3) The latest quote for USD/JPY is 153.33, having briefly dropped below the 153.00 mark during trading for the first time since February this year, reflecting the market's ongoing repricing of policy expectations.