On Wednesday (June 26th) in New York, the USD/JPY exchange rate rose to 160.632, an increase of 0.61%, exceeding the level of government intervention in the market in April. The euro/yen exchange rate has also risen to a historic high. Since the beginning of this year, the US dollar/Japanese yen exchange rate has risen by more than 12%.

Japan's Deputy Minister of Finance and Monetary Director Masato Kanda said on Wednesday that officials are paying close attention to the foreign exchange market with a high degree of urgency and will take appropriate measures if necessary. He described the recent fluctuations in the yen as "rapid" and "unilateral", but avoided commenting on whether the yen's fluctuations were excessive. After he made the aforementioned remarks, the yen expanded its decline.

Japan's borrowing costs are still close to zero, while there is a huge gap in interest rates in the United States, which has been putting pressure on the yen despite attempts to curb its decline. The next important moment may come on Friday when the Federal Reserve's favored US inflation indicator is crucial to the outlook for monetary policy.

Erik Nelson, macro strategist at Wells Fargo, said: "The recent comments from the Treasury indicate that people's concerns have intensified. He expects officials to insist that the US dollar/yen rise above 165 before entering the market, which is a new" bottom line "for the authorities.".

Japan has spent a record 9.8 trillion yen (61.1 billion US dollars) in recent rounds of intervention, which is related to many things. Citigroup estimates that Japan has $200 billion to $300 billion in ammunition to fund any activity, which would require the sale of its cash reserves in the US dollar and other currencies, and even government bonds from around the world, to purchase the Japanese yen.

With the normalization of monetary policy by the Bank of Japan (BoJ), any intervention is more about slowing down the process of the yen finding its final bottom.

The head of macro strategy at Mizuho Securities in the United States stated, "The problem they are facing is that they are intervening in the wrong direction. Their reserves are limited, and they cannot spend hundreds of billions of dollars to defend the currency." So far this week, Tokyo officials' response has been limited to verbal warnings.

Japanese Finance Minister Junichi Suzuki stated that they are closely monitoring the development of the market and will take all necessary measures. Monetary Director Kanda warned on Monday that authorities are ready to intervene at any time if necessary.

"If the trend above 160 points starts to be chaotic, they may intervene in buying until the Bank of Japan becomes more resilient, and the upward trend of the US dollar against the Japanese yen is the path with the least resistance. Around 161 or slightly above 161 is still the most likely threshold for intervention," said Win Thin, Global Market Strategy Director at Brown Brothers Harriman&Co. in New York

Japan's previous actions to support its currency market have attracted overseas attention, with the US Treasury adding Japan to its "monitoring list" of foreign exchange activities last week.

Although the United States has not labeled Japan as a currency manipulator, officials in Washington have stated that "in large, freely traded foreign exchange markets, intervention should only be made in very special circumstances through appropriate prior consultation."

However, the data released by the United States on Friday may alleviate some of the pressure on the yen. Economists predict that the PCE core inflation rate (an indicator that excludes volatile food and energy categories) will slow down, which may support the Federal Reserve's rationale for reducing borrowing costs this year.