The Japanese currency on Thursday weakened to a fresh 20-year low of 134.56 yen per dollar.
Japanese currency authorities were likely left in a bind over the yen’s slide, said Daisaku Ueno, chief forex strategist at Mitsubishi UFJ Morgan Stanley Securities.
“Verbal intervention is not working, while it has not reached a danger zone around 145 yen that I think warrants actual intervention,” Ueno said.
The yen has lost about 14% against the dollar so far this year. It last traded at about 133.88 yen per dollar.
Japan in theory could take unilateral action by intervening, while giving U.S. authorities advanced notice of such a move, Ueno said.
“But that would upset (U.S. Treasury Secretary Janet) Yellen who is a firm believer of market-determined exchange rates, particularly at a time when the U.S. is battling rising inflation,” he added.
However, despite repeating verbal warnings against the yen’s recent weakening, Japanese authorities remain in no mood to intervene in the exchange market, partly because a strong U.S. dollar suggests the currency’s slide is due to fundamental factors.
A government source with knowledge of the matter told Reuters on condition of anonymity that the velocity of the yen’s move would matter more than any particular levels in judging the need for intervention.
Suzuki on Friday said Japan’s government would respond appropriately based on the Group of Seven agreement on foreign exchange.
There is no clear consensus among analysts on the trigger point for currency intervention.
Some investors had previously seen 125 yen to the dollar as a trigger for action in the foreign exchange market – the level known as the “Kuroda line” after BOJ Governor Haruhiko Kuroda signalled caution when the yen last reached that mark in 2015.
(Reporting by Daniel Leussink and Tetsushi Kajimoto; Editing by Chang-Ran Kim & Shri Navaratnam)