Recently, I’ve been closely tracking the movement of the yen versus the U.S. dollar and found something interesting. On May 14, USD/JPY had already risen to 157.95, marking the fourth consecutive day of gains, and it was on the verge of testing the 158 level. This area is somewhat sensitive—everyone in the market is wondering whether the Bank of Japan will take action again and intervene.

Speaking of Japan’s intervention, their moves in recent months have been quite frequent. At the end of April, it was hit hard, falling directly from 160.7 to 155.5, and in early May it fell again from 157.9 back to 155. Behind these moves, you can basically see the shadow of Japan’s authorities. At present, market consensus is that the Japanese government is very likely to lower its defense line from around 160 to roughly 158; once 158 is breached, intervention may be coming.

So why has the yen continued to depreciate against the U.S. dollar? The core reasons are twofold. First, the interest-rate differential—U.S. interest rates are 3.5%-3.75%, while Japan’s are only 0.75%, a gap of nearly 3 percentage points. This interest-rate spread directly boosts carry trades, with the yen being continuously sold off. Second, energy costs: developments in the Iran-U.S. situation have pushed up oil prices, and Japan is also heavily dependent on energy imports. As the trade deficit widens, the yen naturally becomes easier to weaken. In addition, the market now expects the Federal Reserve to not cut rates throughout all of 2026, so the USD’s strong posture does not seem likely to reverse in the near term.

From an intervention perspective, Citibank’s research and calculations suggest that if Japan were to use its foreign exchange reserves to the historical lows seen between 2022 and 2024, the total “ammunition” for this round of intervention could be as high as 30 trillion yen. It sounds like plenty of firepower, but the problem is that intervention can only temporarily press down the yen’s decline. To truly stabilize USD/JPY, the underlying structural issues still need to be addressed. Toshiaki Muneuchi from the Nomura Research Institute has also said that if the deep-rooted causes behind yen depreciation are not addressed, a situation where USD/JPY reaches 160 could become routine.

As for my own view, given that inflation continues to rise, U.S. interest rates remain at high levels, and economic growth is strong, it’s highly likely that the dollar is already entering an upward channel. In this environment, the yen versus the U.S. dollar has little room to turn around. Short-term intervention may create volatility, but the long-term trend may still be on the weak side. To genuinely improve the situation, it would ultimately depend on whether Japan can raise its own interest rates, or whether energy costs can fall—neither of which is easy.