Again touching the 155 level! The curse of the depreciation of the yen is hard to break, and the market doubts are intensified by the divergence between the central bank and government policies.

As the yen exchange rate fell to a level that previously triggered government intervention, traders increasingly doubt whether the new Japanese government can boost the yen through direct intervention. Unlike the intervention before the central bank's rate hike last year, Japan is considering whether to buy yen just as Prime Minister Takaichi Saori signals a slowdown in rate hikes. Saori's expansionary spending plan is exacerbating the yen's weakness, and officials may deplete foreign reserves earmarked for supporting Trump's investment plan if they intervene in the market at this time. "The current environment is completely different from the Japanese intervention last year," said Marito Ueda, Managing Director of SBI FXTrade. "If Saori's policies tend towards fiscal expansion, even if the government can temporarily prevent the yen from falling, it will eventually return to a depreciating trajectory." So far this quarter, the yen has fallen by about 4.5% against the US dollar, the largest decline among the Group of Ten (G10) currencies. During Wednesday's US stock trading session, the yen reached 155.04 against the dollar, with the exchange rate around 154.73 at the time of writing. Earlier, Japanese Finance Minister Satsuki Katayama issued a warning on Wednesday, stating that the yen's trend has shown characteristics of rapid one-sided fluctuations, and the negative impact of a weak yen has become increasingly apparent. She said, "The government is closely monitoring any excessive disorderly movements in the exchange rate with a high sense of urgency." Last year, the Japanese Ministry of Finance intervened when the yen fell to around 160.17, and subsequently entered the market at levels such as 157.99, 161.76, and 159.45. Officials have previously stated that they are more concerned about the magnitude and speed of fluctuations rather than specific exchange rate levels. "If concerns about intervention cannot prevent the yen from clearly breaking above 155 yen to the US dollar, the risk of intervention will significantly increase," said Jane Foley, Director of Foreign Exchange Strategy at Rabobank. There are no fixed criteria for judging whether exchange rate movements are too drastic, but core officials pointed out last year that a fluctuation of 10 yen against the dollar within a month is considered rapid, while a 4% fluctuation within two weeks is inconsistent with the fundamentals. Since the yen briefly touched 149.38 on October 17, cumulative fluctuations have slightly exceeded 5 yen. Although a depreciation of the yen can boost the value of repatriated earnings for export companies, benefiting Japan's strong export sector, it can also raise the cost of imported goods and exacerbate inflationary pressures. Failure to take action to limit depreciation could trigger criticism from the US government, as Trump has previously accused Japan of gaining a trade advantage through currency policies, while also fueling speculation in the yen. Some market observers believe that any intervention action will be ineffective if it does not coincide with rate hikes. The Bank of Japan maintained its interest rate last month with a vote of 7 in favor and 2 against, with the next policy decision scheduled for December 19. A survey last month showed that most economists predict the Bank of Japan will raise rates before January next year. "We believe that once the dollar breaks above 155 yen, verbal intervention may intensify, and the probability of a December rate hike by the Bank of Japan may increase," said Yujiro Goto, Chief FX Strategist at Nomura Securities. He added that combining official intervention in the currency market with rate hikes could push the yen to around 150 or even higher. US Treasury Secretary Scott Besent's statement further supported this view. He urged the new Japanese government to give the central bank space to address inflation and excessive currency fluctuations - a clear signal of support for Japan's rate hike. Hirofumi Suzuki, Chief Foreign Exchange Strategist at Sumitomo Mitsui Banking Corporation, said that if Japan were to intervene in the currency market, it would likely need to first obtain approval from the US, but the US appears to prefer Japan to raise rates rather than intervene directly. However, there is still uncertainty about the pace of monetary tightening. Saori Takaichi, who said last year during the Liberal Democratic Party presidential election that raising rates is a "foolish move." Although her stance has since softened, the leader stated this month that Japan is still pursuing a process of "stable inflation accompanied by wage growth" - a statement suggesting she hopes the Bank of Japan will remain cautious in its policy review. Another variable is that intervention actions could increase the cost of Japan's $550 billion US investment plan - a fund that is a key part of the Japan-US trade agreement, equivalent to nearly half of Japan's foreign exchange reserves. If officials wait for the Bank of Japan to act first, delaying rate hikes may make it more difficult for them to contain bets on depreciation. Overnight index swaps show that the market perceives the probability of a rate hike by the Bank of Japan before the end of the year to be around 40%, while full digestion of rate hike expectations may not occur until April next year. "If Saori is still not willing to see rates rise too quickly, and if the Bank of Japan continues to signal no urgent rate hikes despite high inflation data, yen shorts are unlikely to significantly adjust their positions," said Magdalene Teo, Head of Asian Fixed Income Research at Julius Baer. "Therefore, this environment may limit the effectiveness of any market intervention."