The Japanese Yen exchange rate remains stagnant; can Asian currencies like the Hong Kong dollar benefit? Policy intervention may be just around the corner.

Market observers have noticed that recently the Japanese Yen against the US dollar has hit a new low below the 155 level, and the Euro against the Yen has also reached a historic low. Behind this wave of market movements, it reflects the reality of the widening US-Japan interest rate differential and also hints that Japanese authorities may be facing a crossroads in their decision-making.

Frequent Policy Signals, Intervention Expectations Rise

Japanese Finance Minister Shōzō Katō recently issued a warning about “unilateral rapid fluctuations” in the foreign exchange market, which market participants interpret as a sign that the government may be preparing to take action. Historically, the Ministry of Finance has intervened when the Yen weakened significantly in 2022 and 2024, with intervention levels around 158 and 161.7 respectively.

However, forecasts from institutions vary. Bank of America believes that a test of the 158 level is needed before a substantial policy response is triggered; Goldman Sachs judges that intervention is more likely when the USD/JPY reaches 161-162. This suggests that the urgency for Japanese authorities to intervene at this stage is not very high.

Multiple Factors Intertwined, Focus on Asian Currency Volatility

The temporary funding bill signed by US President Trump ended a 43-day government shutdown, and upcoming US economic data will be an important support for the USD/JPY exchange rate. Meanwhile, the new Japanese Prime Minister Sanae Takaichi’s upcoming economic stimulus plan is also a market focus. The collision of these two factors will determine the trajectory of the Yen and its relative performance against Asian currencies such as the Hong Kong dollar and the Chinese yuan.

Institutional Outlook Offers Clues

Forecasts from JPMorgan and Mizuho Securities suggest that the USD/JPY target price by the end of December 2025 is around 156. This indicates that, from the current position, further adjustment space may be limited, but the window for policy intervention is narrowing. For investors paying attention to the USD/HKD trend, closely monitoring the Bank of Japan’s policy stance and US economic data will be of utmost importance.