As the yen continues to weaken and short sellers swarm in, Japan's top foreign exchange official Masato Kanda issued another stern warning.

Amid widespread expectations that the Bank of Japan's monetary policy will continue to be loose, the yen exchange rate continues to fall, and bearish bets on the yen have soared in the short term.

In response to this situation, Japan’s Deputy Minister of Finance Masato Kanda warned:

"The current depreciation of the yen is inconsistent with fundamentals and is clearly driven by speculation. We will take appropriate action against excessive volatility and do not rule out any possible options."

After Kanda's warning, Japanese stocks fell, leading Asia-Pacific stock markets to fall today, with the Nikkei 225 Index and Topix both closing down more than 1%.

Will the yen fall below the 152 mark?

Last week, the Bank of Japan announced an interest rate hike for the first time since 2007, marking the end of the world's last era of negative interest rates. Since then, the yen has continued to weaken, and the U.S. dollar has soared against the yen, reaching above the 151 mark, close to the last time Japan intervened in 2022. The foreign exchange level at that time was 151.95 USD/JPY.

This means that if the yen continues to weaken to around 152, Japan may intervene in the currency market again.

Takeshi Ishida, a strategist at Resona Holdings in Tokyo, said:

"The tone of verbal intervention is intensifying, and the yen may find short-term support amid growing risks of real action."

"Kanda admitted the move was speculative and seemed to view 152 as a pass."

Generally speaking, the central bank's decision to raise interest rates tends to push the local currency to strengthen. However, as Bank of Japan Governor Kazuo Ueda emphasized in his post-meeting speech that financial conditions will remain loose, it ignited market expectations that the Bank of Japan will not raise interest rates further in the future. , leading to continued weakness in the yen.

Hedge funds have increased bearish bets on the yen, with leveraged speculators in currency markets adding 80,805 bearish yen contracts in the week to March 19, according to data from the U.S. Commodity Futures Trading Commission (CFTC). It's close to a six-year high set last month.

Outside of the market, Wall Street seems to be generally bearish on the yen.

Recently, Goldman Sachs Group has raised its forecast for the exchange rate of the US dollar against the Japanese yen. It is expected that in the next three months, six months and 12 months, the exchange rates of the US dollar against the Japanese yen are expected to touch the levels of 155, 150 and 145 respectively, which is higher than the previous level. The expectations of 145, 142 and 140 have been raised.

Goldman Sachs believes that a more stable macroeconomic environment may put downward pressure on the yen in the coming months.

Some people believe that as the most attractive financing currency in carry trades, the Japanese yen exchange rate depends largely on the Federal Reserve's interest rate cut path. As interest rate cut expectations are repeatedly pushed back, the U.S. dollar continues to strengthen and the Japanese yen will continue to be under pressure. .