A former Japanese currency diplomat hinted that the authorities may not intervene if USD/JPY only breaks the 152 threshold.

The USD/JPY rate has been circulating in a narrow range below 152.00 for the past ten days. Japanese officials have repeatedly emphasized the importance of exchange rate stability, so market participants are concerned about the risk of currency intervention. But Hiroshi Watanabe - a former Japanese currency diplomat - said authorities are unlikely to intervene unless the yen falls below 155 against the US dollar.

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Japan last intervened when USD/JPY reached the 152.00 threshold in October 2022. Such a historical record makes many market participants hesitant to encourage further rallies from current levels. However, Hiroshi Watanabe stated that the chances of intervention are very narrow as the Yen exchange rate has fallen much more sharply now than in 2022.

Hiroshi Watanabe served as Vice Minister of Finance for Foreign Affairs, overseeing Japan's currency policy from 2004 to 2007. Based on his experience, he told Reuters that Japanese authorities are unlikely to view a breakout from the 152 threshold alone as sufficient reason to intervene in the market.

 "At current levels, I don't think the authorities will intervene. They probably won't take action unless (if) the yen suddenly falls below 155 against the dollar," Watanabe said.

According to Watanabe, the 155 threshold will be a very important psychological level. A breakout from the 155 threshold would provoke media attention, thus increasing the chances of intervention by the Japanese authorities. Especially if the fluctuation is very sharp.

At the same time, he recognizes that the BoJ's ultra-low interest rates will continue to pressure the yen exchange rate. Many other reasons could prevent the yen from rebounding significantly, particularly because many Japanese companies no longer repatriate the profits they earn overseas and instead spend them on further investment abroad.

 "Even though the Japanese economy is improving, it may not necessarily lead to a stronger yen," Watanabe added.