The yen weakened below 160 yen/dollar, with markets watching for a new round of Japanese intervention.

The yen weakened again, breaking below 160 yen per dollar, sparking speculation of renewed Japanese intervention in the market. Strategists point to the 161-163 yen zone as a risky level.

On August 31, 2026, at 10:00 AM, Bloomberg News reported that the Japanese yen weakened again, breaking below 160 yen per dollar, underscoring the fragility of the Japanese currency and increasing the risk that authorities may intervene in the foreign exchange market again to curb the depreciation, after the large-scale intervention at the end of July only temporarily supported the currency.

Strategists warn that while it's impossible to pinpoint the exact level at which Japanese authorities will intervene, the market is watching 161 yen per dollar as a key level, followed by the 162–163 yen area, where previous interventions have occurred. However, further intervention may only buy time, as the yen has lost more than half of the appreciation it experienced after the major intervention in July.

The latest pressure on the yen stems partly from the broader strengthening of the dollar on Friday, amid expectations of rising U.S. interest rates, further reinforcing the view that many of the factors shaping the yen's direction are beyond Japan's control.

The yen faced selling pressure again after failing to strengthen above 155 yen per dollar following the July intervention, in which the United States joined Japan in buying yen. This marked the first joint currency intervention by the two countries since 2541.

Rinto Maruyama, senior interest rate and foreign exchange strategist at SMBC Nikko Securities, said the first key level to watch is 161 yen per dollar, followed by the 162.9-163.3 yen range, where authorities last intervened. However, previous government actions were largely surprise-seeking, meaning authorities could intervene at any time.

At 11:50 a.m. Tokyo time on Monday, the yen was trading at around 159.77 yen per dollar, strengthening about 0.2% from Friday's New York closing level of approximately 160.09 yen per dollar.

Japan's Finance Ministry revealed that in the past month, Japan spent a record $9.64 billion to prop up the yen after the currency fell to its lowest level in four decades. Meanwhile, Japanese Finance Minister Satsuki Katayama and U.S. Treasury Secretary Scott Basecent both signaled their readiness to take further measures if necessary.

However, Japanese officials have consistently emphasized that the key factor in considering intervention is not any particular exchange rate level, but rather the speed and disorder of currency movements.

Bassent also stated that he expects Bank of Japan (BOJ) governor Kazuo Ueda to conduct monetary policy appropriately, and assessed that recent movements in the yen have remained relatively controllable.

The swap market reflects a high probability (90%) that investors will raise interest rates at the BOJ's September 18th policy meeting, while a rate hike by October 30th is already fully priced in.

Rodrigo Catril, a strategist at National Australia Bank, believes the risk of Japan intervening in the market will significantly increase when the dollar/yen moves above 162 yen per dollar. However, curbing the yen's weakening is difficult in an environment of broadly strengthening dollar and signals of tighter monetary policy from the U.S. Federal Reserve (Fed).

Speculative buying in the market has turned negative again for the yen, with hedge funds increasing their short positions on the yen after previously reducing their betting on a significant depreciation following interventions by the US and Japan. These investor groups have generally held a negative position on the yen since July 2568.

Carol Kong, a strategist at Commonwealth Bank of Australia , said Japanese authorities don't need to wait until the BOJ meeting if the yen weakens rapidly. However, given the high weighting in the market towards a September interest rate hike, authorities may want to wait and see how much monetary policy can support the yen.

Analysts believe that market intervention alone may not be enough to reverse the yen's direction as long as Japan's real interest rates remain significantly negative.

Moh Siong Sim, a strategist at Oversea-Chinese Banking Corp., stated that the Bank of Japan (BOJ) is facing increasing difficulties due to limitations on how much the central bank can raise interest rates beyond market expectations. Therefore, Japan may need to implement other measures, such as encouraging capital repatriation, to help reverse the yen's depreciation.

Reference: www.bloomberg.com

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