The yen fell near the 155 mark. Goldman Sachs and Bank of America: The time for intervention has not yet come, with the red line around 160!

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As the yen-to-dollar exchange rate approaches the closely watched 155 level, speculation in the market is mounting over whether Japanese authorities will step in to intervene.

However, major investment banks such as Goldman Sachs and Bank of America currently believe that immediate intervention by the Japanese authorities is unlikely. The current depreciation of the yen has not yet met the usual conditions that trigger intervention, and the real "bottom line" may be far below the generally expected 155 level.

Goldman Sachs believes that the possibility of intervention will only increase significantly when the USD/JPY exchange rate reaches the 161-162 range. Bank of America points out that the rate may need to test the 158 level before triggering a meaningful policy response.

On Tuesday, the yen exchange rate further slipped to 154.48. Previously, in October, the yen depreciated about 4% against the dollar, becoming the worst-performing currency among the G-10 currencies. This round of selling was driven by market interpretation that Prime Minister Sanae Takaichi favors fiscal expansion and dovish monetary policy, as well as the Bank of Japan's decision last week to keep interest rates unchanged and Governor Kazuo Ueda's failure to provide clear guidance on future rate hikes.

In response to the continued depreciation of the exchange rate, Wallstreetcn mentioned that Japan's new Finance Minister, Mitsuki Katayama, stated last Friday that the authorities are monitoring exchange rate movements with a "high sense of urgency," including volatility driven by speculation. At that time, the market speculated that the intervention threshold from Japan's authorities might be around 155.

However, Katayama's verbal warning failed to effectively halt the yen's decline, and investors are now looking for more concrete intervention signals and potential trigger levels.

Intervention trigger conditions not met, "bottom line" may be at 160?

Both Goldman Sachs and Bank of America believe that the risk of Japan intervening in the currency market immediately is low. Karen Reichgott Fishman, a strategist at Goldman Sachs, wrote in a report on Monday that the yen "does not appear to be at a particularly weak level," and its recent weakness is mainly driven by the repricing of Japan's fiscal risk premium and adjustments in expectations for the Bank of Japan's short-term interest rates.

This view is shared by BofA's FX strategist Shusuke Yamada. He noted that in the absence of "excessive volatility or accumulation of speculative positions," a breach of 155 in USD/JPY is "unlikely to trigger immediate intervention." Both institutions pointed out that the "usual conditions for intervention have not yet been met."

Historically, the last time Japan's Ministry of Finance intervened in the FX market was in 2024, with intervention levels occurring at around 157.99, 159.45, 160.17, and 161.76. Since then, authorities have stayed out of the market for more than a year.

According to Goldman Sachs, Japan's Ministry of Finance has about $270 billion available for intervention, giving it the ability to conduct operations comparable in scale to the most recent interventions in 2022 and 2024. The bank believes that the possibility of intervention will only rise significantly when USD/JPY reaches the 161-162 level.

Bank of America's Yamada believes that in the absence of sharp volatility, the rate "may have to test the 158 level before a meaningful policy response is triggered."

Risks of yen dropping to 160 are rising

Regarding the future outlook, BofA's Yamada maintains his year-end forecast of 155 for the exchange rate, but adds that "the risk of the rate overshooting to 160 in the fourth quarter of 2025 has increased."

Goldman Sachs expects the yen to gradually appreciate as hedging costs fall and the dollar weakens, and this trend could accelerate if US labor market data deteriorates.

However, the bank also warns that the outlook for yen appreciation could be dampened if Japan introduces greater-than-expected fiscal stimulus measures—especially if these are seen as limiting the Bank of Japan's ability to tighten policy—or if the US economy outperforms expectations again.

Risk disclaimer and limitationsThe market carries risk—invest with caution. This article does not constitute personal investment advice, nor does it take into account individual user’s special investment goals, financial situation, or needs. Users should consider whether any opinions, viewpoints, or conclusions in this article are suitable for their specific circumstances. Investments made based on this are at your own risk. ```