The Japanese yen's exchange rate is hovering around a critical level, bringing the risk of Japanese government intervention back into investors' sights. Market trends show that the yen has fallen for the second consecutive week, approaching the 150 mark on Monday. As of the time of writing, the USD/JPY is reported at 149.63.

Earlier this month, Atsushi Mimura, the current Deputy Minister of Finance for Japan who recently succeeded Masato Kanda, stated that he is closely monitoring the movements in the foreign exchange market, including speculative trends. The newly appointed Finance Minister of Japan, Katsutoshi Kato, also warned that sudden fluctuations in the yen could have negative impacts on businesses and households.

Various signs are indicating that the narrowing pace of the US-Japan interest rate differential may not be as fast as anticipated, and the yen still faces downward pressure. The newly appointed Prime Minister of Japan, Shinzo Abe, previously stated that he hopes to maintain an accommodative monetary policy, as the domestic economy is not ready for interest rate hikes. On the other hand, strong CPI data in the United States has dampened expectations for rate cuts, and Federal Reserve Governor Christopher Waller recently made a hawkish statement, saying that future rate cuts would require "greater caution."

Advertisement

Takuya Kanda, the head of research at Tokyo's Gaitame.com Research Institute, believes that the key level to observe the yen's weakening trend is at 152. He stated, "This marks a critical level for the yen, as it quickly fell towards 160 after breaking through this level last time." For reference, the last time the Japanese government intervened in the market, the yen weakened to 161.95.

However, there are also opinions that the current foreign exchange levels are not sufficient to prompt the Japanese government to intervene.Eiichiro Miura, head of the strategic investment department at Nissay Asset Management, believes:

"The government will not intervene unless the yen falls below 160."

Data from the Commodity Futures Trading Commission (CFTC) as of October 8th shows that the net long yen positions of leveraged funds fell for the second consecutive week, indicating a weakening bullish sentiment towards the yen.