Feb 28 (Reuters) - USD/JPY has been in a downtrend since the January 25 high of 158.88. The trajectory appears to remain down and moves through 148.00 and towards the September 16, 2024 spike low of 139.58 would not surprise.

USD/JPY has recently remained within a 148.56-150.30 range, the high and low on February 25. Rallies above 150.00 have been roundly rejected by Japanese exporters and other players in wait. Moves lower have been supported by Japanese importers and yen bulls looking to book profits.

Option expiries have helped to contain spot action, and may continue to do so through March. That said, flows may have a greater impact as Japan nears the end of its fiscal year next month.

Repatriation could be very heavy in March with many Tokyo players anticipating further yen strength as the calendar year progresses. Despite recent trade deficits, Japan has consistently posted current account surpluses on repatriation of foreign earnings. Large repatriation flows will likely continue and could even spike ahead of the fiscal year-end.

Narrower Japan-U.S. interest rate differentials should egg the yen higher. Granted, the Federal Reserve is in pause mode but the Bank of Japan seems ready to hike again , if not in March then in May and/or beyond as the economy continues to grow and inflation remains elevated .

Some money centre banks have called for a near-term USD/JPY drop to 146. Moves even lower look possible should the next BOJ rate hike occur early and if Japan manages to avoid the worst of any U.S. trade tariffs.

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USD/JPY:


USD/JPY nearby option expiries to March-end:


JGB-US Treasury 2-year interest rate differential:

(Haruya Ida is a Reuters market analyst. The views expressed are his own. Editing by Sonali Desai)