TOKYO (AFX-ASIA) - The dollar was higher against the yen in midafternoon trading reflecting mounting speculation that Japan and the US may agree on a foreign exchange policy that would leave the yen weak, dealers said. Finance Minister Masajuro Shiokawa and US Treasury Secretary Paul O'Neill will meet in Japan tomorrow. Hachijuni Bank foreign exchange dealer Naoya Kozu said he expects the bilateral talks to yield "some agreement" on foreign exchange policy, leading to continuing support for the US currency. ABN Amro foreign exchange manager Toshihiko Masaki, however, said he does "not expect much from this meeting." "When we see the dollar below 120 yen then there is a chance," he said, noting that the market speculation is helping to do the policymakers' job for them. The dollar, even if there is no strong agreement tomorrow at the Shiokawa-O'Neill meeting, may continue to trend higher due to improvement in supply and demand conditions, together with technical factors, dealers said. "It seems that the dollar has solidified its downside below the 120 yen level, and it is entering a rebound phase," Kozu said. "Immediate upside target for the dollar is 122.00-122.50 yen level, but the unit is not likely to go beyond unless there is physical intervention by the Bank of Japan." Talk of additional monetary easing by the BoJ at the next week's policy meeting and the risk of the Nikkei 225 index falling to below the 10,000 point level are also expected to continue to bolster the dollar, dealers said. "Although the market has been downplaying the risk of the fall in the Nikkei 225 index to below the 10,000 yen level, if it actually happens, it is most likely to be negative for to the yen," Kozu said. The euro was steady below the 0.90 usd level due to a lack of follow-through selling, with local investors simply waiting for fresh news, dealers said. "The euro is not likely to find clearer direction in the near-term and perhaps continue to trend around the present level," Kozu said. "In the long-term, however, the unit has a good chance of making clear headway beyond the 0.90 usd level."