- The yen once fell to 162.83 against the dollar, hitting a 40-year low. Despite Japan's previous record-scale intervention, the market generally believes that unilateral actions alone are unlikely to reverse the current downward trend in the exchange rate.
- Several strategists point out that the key to the yen's continued weakness is not Japan's tough stance, but the significant interest rate differential between the US and Japan. As long as the returns on dollar assets significantly exceed the cost of yen financing, carry trades will continue to suppress the yen.
- This is why the market is now not only focused on whether Japan will intervene again, but also on the future policy path of the Federal Reserve and the possibility of higher-level coordinated actions between the US and Japan.
Yen Approaches Policy-Sensitive Range Again
The range of 162 to 163 is widely seen as an observation area where official intervention might occur again. The exchange rate continuously approaching or even breaking through this range will force the market to reassess the Japanese government's tolerance for yen depreciation.
Interest Rate Differential Remains the Root of Exchange Rate Pressure
Although Japan has gradually exited ultra-loose policies, its benchmark interest rate remains far below that of the US. For global funds, the logic of borrowing low-interest yen and allocating high-yield dollar assets has not changed, which is the fundamental reason for the yen's pressure.
Unilateral Intervention More of a Delay Than a Reversal
Analysts generally believe that intervention can curb excessive speculation and slow the rate of decline, but it is difficult to change the direction. As long as the dollar remains strong overall, rebounds from Japan's solo actions are often short-lived.
Coordination Space Determines Subsequent Impact
If future coordination with the US or other major central banks occurs, the market's pricing of a yen rebound will be significantly different. For this reason, the current foreign exchange market is not only focused on Tokyo's stance but also on policy signals from Washington.
