It seems the yen’s downward trend is really never ending. I’ve been watching the USD/JPY range back and forth between 152 and 160, and by the end of May, there’s still no sign that the depreciation trend has been halted. To be honest, this round of yen weakness has been quite severe—its real effective exchange rate has even hit the lowest level in nearly 53 years.

Looking closely at the underlying causes, it’s really a combination of several structural factors stacked together. First, the interest-rate spread between the U.S. and Japan has been widening continuously, and the pace of interest-rate hikes by the Bank of Japan is far behind that of the Federal Reserve. Although the BOJ raised its policy rate to 0.75% in December last year, U.S. rates are still much higher, which attracts a large amount of carry-arbitrage trading—investors borrow low-interest yen to buy U.S. dollar assets, and naturally sell yen in the process. Second, the new Japanese government’s fiscal expansion policies are also increasing market concerns about Japan’s debt, further weighing on the yen. On top of that, instability in the Middle East has pushed up Japan’s import costs for crude oil, widening the trade deficit—these are all drivers behind the yen’s decline.

Right now, the market’s main focus is the Bank of Japan’s June meeting. Previously, expectations were for a rate hike in April, but the timing was thrown off by the Iran war, so the central bank stayed put. However, according to a Reuters survey, about two-thirds of economists expect the BOJ to raise rates from 0.75% to 1.0% before the end of June. If it really does happen, the U.S.-Japan interest-rate differential would narrow, which would be a positive signal for the yen and could draw some arbitrage funds back.

That said, to truly turn things around, the yen still needs Japan’s internal reforms. Raising interest rates alone isn’t enough—you also have to see whether Japan’s economic growth can genuinely take off, and whether a healthy cycle between wages and prices can really be sustained. Currently, consumption inside Japan is still relatively weak, with GDP turning negative from time to time, which is why the BOJ remains cautious about hiking rates.

What are institutions saying? JPMorgan’s Junya Tanase is one of the most pessimistic voices on Wall Street. He believes the yen could fall to 164 by the end of this year. Strategists at BNP Paribas also expect the exchange rate to probe lower to 160. Their logic is much the same: global risk sentiment remains relatively upbeat, which supports ongoing arbitrage trading, and the Federal Reserve could be more hawkish than expected—both of which are favorable for the U.S. dollar and put considerable downward pressure on the yen.

In the short term, the USD/JPY is likely to keep trading in a range between 152 and 158. Although there is a possibility that Japanese authorities intervene, these measures are usually just a stopgap and are unlikely to fundamentally change the trend. The real turning point in the long run will still depend on whether Japan can push through substantive economic reforms that allow growth momentum to truly gain traction. Only then can the yen break free from its current predicament.