Credit Agricole CIB Research discusses the scope for another round of JPY intervention by Japan's MoF.

"The risk of intervention reduces the demand for being long USD/JPY as a carry trade. And the MoF has enough FX reserves to perform over 15 more FX interventions of the size it did during April and May. With USD/JPY clearing the important 162 level, however, the key battleground for the exchange rate in the 162-164 region has opened up. The decline in USD/JPY over the past year has now reached double digits accelerating its upward pressure on inflation. This will anger voters. While the government is already doing quite a bit to relieve inflation pressures on households including subsidised retail energy, fuel and utility bills, Japan’s households know a higher USD/JPY will eat into these subsidies," CACIB notes.

"In the end, Japan benefits from a weak JPY and so has to manage the political and economic realities around the currency. The weak JPY is boosting company profits, exports and importantly is helping lift domestic investment to the levels Takaichi wants to see during her tenure. So we think Japan’s authorities will continue to manage a weak JPY but avoid USD/JPY moving above 164 in the long term," CACIB adds.