In summary from an MUFG outlook:
MUFG Bank suggests that the Japanese yen might strengthen further against the dollar, as the Federal Reserve is expected to begin cutting interest rates in September, while the Bank of Japan may raise rates again later this year.
According to MUFG analysts, the market is underestimating the likelihood of another BOJ rate increase, as BOJ officials indicated in August their readiness to hike rates if their forecasts are met. The analysts believe that concerns about financial market instability from late July and early August will likely diminish, making a 25 basis-point hike in the fourth quarter, probably in December, a strong possibility.
MUFG expects USD/JPY to fall to 141.000 by Q4
