Yen Holds Losses Below 157.00 Dollar as Intervention Concerns Intensify

The yen extended its previous bearish tone at the start of this week, consolidating weakly around 157.14 against the dollar. With Japanese markets remaining closed due to a bank holiday, overall trading volume was low, amplifying the inertia of exchange-rate fluctuations. Earlier, the yen briefly approached the 159.24 level, but prices rebounded amid strong expectations that Japanese financial authorities might intervene, and the currency is currently holding its losses near the 157 threshold.

**Intervention Expectations Become Key Near-Term Support**

Intervention risks facing the yen have risen notably recently, serving as the main psychological line of defense preventing further downside breaks. Market reports indicate that Japan and the United States previously coordinated actions on exchange-rate fluctuations, reflecting growing U.S. concerns over the spillover effects of excessive yen depreciation. According to strategists at Mizuho Bank, such concerns are not limited to Japan alone but also center on the potential knock-on effects of a sharply weaker yen on the U.S. Treasury market. Goldman Sachs strategists also noted that intervention is an effective means for authorities to buy time while waiting for fundamentals to improve, and that authorities are likely to step in again if the yen gives back recent gains.

**Dual Pressure from Yield Spreads and Oil Prices**

Despite intervention expectations temporarily steadying the currency, the yen still faces structural depreciation pressure. On one hand, U.S. Treasury yields remain persistently high, supporting the dollar index near one-year highs, while the U.S.-Japan yield spread stays at a wide level, diminishing the appeal of yen-denominated assets. On the other hand, crude oil prices remain elevated, partly due to supply-side disruptions, which has worsened Japan's terms of trade. Sumitomo Mitsui Bank's chief FX strategist, Hiroshi Suzuki, believes that with oil prices rising and worsening trade conditions, the yen may continue to face depreciation pressure over the medium term.

**Thin Trading Amplifies Short-Term Volatility**

The current low-liquidity environment caused by the Japanese holiday means that any minor development could trigger sharp swings in the exchange rate. Market participants are closely monitoring comments from Japanese Ministry of Finance officials and subsequent guidance from U.S. economic data to assess whether intervention risks will translate into actual action. Until a substantive shift occurs in the fundamental landscape, the yen will likely continue to seek direction amid a tug-of-war between bulls and bears.