The yen's slide past the 160 mark against the US dollar underscores its vulnerability to further weakness while raising the odds of renewed intervention by Japanese authorities. Although the precise threshold for action remains unspecified, strategists warned on Monday that the next potential trigger for a fresh round of intervention could emerge near 161, with a follow-up zone seen in the 162-163 range. They maintain that such moves, beyond buying time, are unlikely to reverse the broader trend, given the yen has already surrendered most of the gains it made following the record intervention in late July.
The latest leg of the yen's decline stems from a robust US dollar rally last Friday, fueled by expectations of higher American interest rates, which further reinforced the view that the currency's trajectory is largely beyond Tokyo's control. Since the US and Japan conducted their first joint yen-buying operation since 1998 in July, the yen has failed to break through the 155 level, and pressure on it has since reignited.
With the currency dipping below 160 again, attention is turning to potential official action. Rinto Maruyama, senior rates and FX strategist at SMBC Nikko Securities, highlighted key levels to monitor. "In terms of crucial thresholds, the first focus is 161, followed by the 162.9-163.3 zone, which was the area of last intervention," he said. He also noted that the government was "fairly focused on maintaining the element of surprise" in its prior action, meaning officials could move at any time. On Monday, the yen traded at 159.77 against the dollar, after closing around 160.09 on Friday.
Over the past month, Japan has spent a record $96.4 billion, according to Ministry of Finance data, to shore up a currency that had sunk to four-decade lows. Both Finance Minister Katsunobu Kato and US Treasury Secretary Scott Bessent have signalled their readiness to act again if necessary. Japanese officials have repeatedly stated that the key criterion for intervention is the speed and disorderliness of currency moves, rather than any specific exchange rate level. Bessent, meanwhile, said he expects Bank of Japan Governor Kazuo Ueda to "make the right choices" on monetary policy, while describing recent yen moves as "quite manageable".
Swap market pricing implies a 90% probability of a rate hike at the Bank of Japan's September 18 policy meeting, with a move by October 30 fully priced in. Former BOJ board member Seiji Adachi cautioned that the central bank has been "essentially cornered, with the market having almost fully priced in a hike. If they don't deliver, the yen could weaken significantly again."
Rodrigo Catril, strategist at National Australia Bank, said intervention risk becomes substantive only if the dollar-yen rate rises above 162. "Given the broad strength of the dollar and the hawkish signals from the Fed, conducting intervention would be challenging," he added.
Speculative positioning has also turned bearish on the yen once more. Hedge funds, which had significantly trimmed their short positions after the joint US-Japan intervention, have now rebuilt them. They have maintained an overall bearish stance on the yen since July 2025.
Carol Kong, strategist at Commonwealth Bank of Australia, noted that if the yen weakens rapidly, Japanese authorities might not necessarily wait for the BOJ meeting before intervening again. "But given widespread expectations of a September hike, authorities might prefer to first see if monetary policy can provide some support for the currency," she said.
Market observers argue that, ultimately, with Japan's real interest rates still deeply in negative territory, intervention alone may struggle to turn the yen's fortunes around. "The BOJ faces a larger dilemma given the limits on how much it can surprise the market with rate hikes," said Alvin Mo, strategist at OCBC Bank. "To reverse the yen's weakness, other measures such as encouraging capital repatriation must play a role."
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