The Japanese yen is approaching its weakest level in 40 years despite the Bank of Japan raising rates, signaling that the rate differential with the US remains too wide to reverse yen weakness. This sets up continued pressure on yen-sensitive trades and raises the question of whether BOJ is willing — or able — to intervene more aggressively.
The carry trade structural driver (Fed-BOJ rate differential) remains intact and the BOJ's credibility gap suggests further yen weakness toward 160+ is the path of least resistance absent direct intervention.
Japanese authorities intervened twice in 2022 when USD/JPY breached key levels, and MOF rhetoric has escalated — a unilateral or coordinated intervention here could generate a violent yen short squeeze, especially with positioning already skewed short-yen.