The Japanese yen exchange rate rebounded sharply, breaking above 156! Is government intervention imminent? What will the future trend be?

Investment Insights - Yen bears temporarily retreat, but the weak situation can easily return. On December 23, the USD/JPY fell over 0.6% to 155.91, marking a second consecutive day of decline. The EUR/JPY also continued to retreat from its historical high. In terms of information, Japan's Finance Minister Shunichi Suzuki warned about recent exchange rate fluctuations, stating that there is discretion to take bold actions. On the same day, Vice Finance Minister Jun Mimura indicated that the recent sharp and one-sided fluctuations in the exchange rate would prompt the government to take appropriate actions against excessive volatility. The market anticipates that the Japanese government is about to intervene in the foreign exchange market, potentially reversing the trend of yen depreciation. Previously, on December 19, due to the Bank of Japan's dovish rate hike, the USD/JPY briefly rose to 157.76. [Source: TradingView; USD/JPY trend over the past three months] Will the Japanese government intervene in the market during the Christmas period? Matt Simpson, Senior Market Analyst at StoneX, stated that if Japanese authorities indeed intend to intervene, the low liquidity window from Christmas to New Year would maximize the effectiveness of their intervention measures. "Unless we see the yen exchange rate sharply break through the 159 level, I don't think they see a need to act. In 2022, when market volatility was greater, traders seemed to be forcing the Ministry of Finance to take action, but this time there seems to be a lack of that atmosphere." What is the future trend of the yen exchange rate? Charu Chanana, Chief Investment Strategist at Saxo Bank, pointed out that the slow rate hike cycle of the Bank of Japan, combined with the potential easing policy of the Federal Reserve in 2026, means that the likelihood of unilateral yen weakness is reduced, with a greater possibility of range-bound fluctuations—Japan may strengthen when U.S. Treasury yields decline or risk appetite shifts. "The biggest risk is that U.S. rates remain high for an extended period while the Bank of Japan becomes cautious again. Attention should be paid to Japan's spring wage negotiations." Currently, the market generally expects the Bank of Japan to raise interest rates again in the second half of 2026. Former Bank of Japan Monetary Policy Committee member Makoto Sakurai predicts that the next rate hike to 1% may occur around June or July next year. Hiroshi Suzuki, Chief Foreign Exchange Strategist at Sumitomo Mitsui Banking Corporation, forecasts that the Bank of Japan's next rate hike will be in October 2026 "Since there is still a considerable amount of time before interest rates rise, the exchange rate is likely to fluctuate towards the depreciation of the yen." Hiroshi Suzuki believes that in the first quarter of 2026, the yen exchange rate may depreciate to 162