(Bloomberg) -- The yen's slide to its weakest against the dollar in four decades has left traders looking for Japan's next line in the sand for the currency.
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After dollar-yen broke through 162 on Tuesday, strategists increasingly pointed to 163 and beyond as the next levels to watch, arguing the Finance Ministry may tolerate a weaker currency than during its intervention campaign in 2024. A move to these new thresholds may be swift due to market positioning and US payrolls this week, they said.
This underscores a shift in mindset among traders, driven by concerns the government could have come in harder with comments aimed at pulling the yen away from the weakest level since 1986. In a broader sense, the Bank of Japan's historic unwinding of rock-bottom rates is also seen as far-too gradual to reverse the currency's deepening slide.
"The next level to watch is 163," said Rinto Maruyama, senior FX and rates strategist at SMBC Nikko Securities. Intervention concerns have helped keep the yen stronger than it otherwise would have been following the Federal Reserve's latest meeting, he said.
Had the yen weakened in line with other major peers, dollar-yen would already be trading around 163 or 164, Maruyama said.
Ikue Saito, a strategist at JPMorgan Chase & Co., said the intervention trigger is now likely higher if authorities adopt the "stealth approach" used during 2024's operations. The limited effectiveness of the last intervention could also make the Finance Ministry more cautious about stepping into the market too quickly, she wrote, adding that Tuesday's move suggested stop-losses and option barriers around the 162-162.50 area had been triggered.
The reassessment comes despite consistent verbal warnings from Japanese officials. Finance Minister Satsuki Katayama and Chief Cabinet Secretary Minoru Kihara both reiterated on Tuesday that Japan will take appropriate action on foreign exchange at any time as necessary.
Yet this jawboning did little to halt the currency's decline, with the yen weakening to as low as 162.41 in Tokyo trading.
Read: Why Hasn't Japan Been Able to Stop the Yen's Slide?: Explainer
Katayama's remarks on Tuesday were not as assertive as those given in late April, just before Japan began a record round of intervention. At that time, she went as far as saying that people shouldn't take their eyes off their smartphones, even when they were out or on holiday.