The USD/JPY exchange rate breaks above the 155 level, increasing the risk of intervention by Japanese authorities

According to Zhitong Finance APP, on Wednesday, the exchange rate of the US dollar against the Japanese yen rose by 0.29% to 155.05, breaking the 155 mark for the first time since July. This increases the risk of Japanese authorities intervening to slow down the depreciation of the yen.

Data shows that Japanese authorities spent a record 9.8 trillion yen (approximately 63 billion USD) during interventions at the end of April and early May this year. After the yen fell to its lowest level against the dollar since 1986, Japanese authorities also spent 5.5 trillion yen on intervention in early July.

The yen has continued to decline since Trump won the US presidential election, largely due to the strengthening of the dollar and US Treasury yields. The current downward trend has brought the yen close to the level at which Japanese authorities last intervened to boost the yen. A survey conducted last month indicated that economists' median expectation for the dollar-yen exchange rate that could trigger intervention by Japanese authorities is 160.

Prior to this, Japanese officials had already warned about the unilateral fluctuations of the yen. Atsushi Mimura, the top foreign exchange official at the Japanese Ministry of Finance, stated last month that he was closely monitoring the foreign exchange market. Mimura said, "Currently, we are seeing slight unilateral and sudden fluctuations in the foreign exchange market. We will continue to monitor the foreign exchange market with a high sense of urgency, including any speculative behavior."

The economic policies proposed by Trump may lead to continued expansion of the US economy and a resurgence of inflation, which could further result in the Federal Reserve keeping interest rates high. In this scenario, the yen may further depreciate as the market questions the extent of the narrowing interest rate differential between Japan and the US.

Meanwhile, the continued weakness of the yen may prompt the Bank of Japan to consider raising interest rates earlier. Bank of Japan Governor Kazuo Ueda acknowledged in October that exchange rates have been affecting Japan's price trends. Last week, former Bank of Japan board member Kazuo Momma pointed out that Trump's victory in the US presidential election has intensified the uncertainty faced by the Bank of Japan, and the yen may further depreciate due to Trump's election, which could prompt the Bank of Japan to raise interest rates earlier