Summary
The USD/JPY remained in a range above 145 and below 150 in September despite numerous developments, including Prime Minister Shigeru Ishiba's resignation announcement and the Fed restarting rate cuts. The Fed looks set to enter a monetary-easing phase with inflation still elevated. We do not expect the dollar to weaken rapidly because markets have already largely priced in further rate cuts, but a dollar-softening bias is likely to persist. Meanwhile, the BOJ is expected to resume rate hikes in October. This is not yet fully priced in, leaving room for yen buying. However, we do not expect the yen to strengthen sharply given that the BOJ is unlikely to hike rates rapidly. Caution is required in the near term since political risks in Japan and overseas could trigger sharp moves in the USD/JPY.