Japan's suspected intervention in the foreign exchange market on Monday raised questions about how much action the authorities need to take to effectively support the yen.

According to an analysis of central bank accounts, although market liquidity was thin that day due to holidays (which generally exacerbated market volatility), the amount spent by officials intervening in the foreign exchange market could be almost the same as in 2022, when the Japanese authorities bought a record amount of yen.

"although 5 trillion yen was spent in markets where there was little trading activity, the exchange rate was only pushed up by just over 5 yen, and then quickly recovered more than half its value," Gaitame said.CryptopvpSaid Takuya Kanda, director of research at .com Research Institute. "compared with the intervention two years ago, it doesn't seem to be very cost-effective."CryptopvpHe said.

The yen rebounded sharply to 154.54 after hitting a 34-year low of 160.17 to the dollar on Monday, prompting speculation that the government had intervened in the market. Since then, the yen has given up a large percentage of its gains, trading around 158 to the dollar on Wednesday.

Makoto Kanda, Japan's top foreign exchange official, did not say whether the authorities intervened in the foreign exchange market on Monday, but he said appropriate action would be taken to deal with excessive volatility caused by speculation.

In October 2022, the Japanese authorities intervened for two consecutive working days, and the yen rose from 151.95 to 145.56 to the dollar, then strengthened steadily, and market speculation that the Fed had suspended raising interest rates also helped.

This time, strong US data and stubborn inflation have raised expectations that the Fed will keep interest rates higher for longer, raising the risk of further depreciation of the yen.

While a weak yen usually benefits Japanese exporters, companies have called on the government to take action to boost the yen, saying excessive devaluation could lead to higher prices of imported materials, which could hit profits. The weakness of the yen is also worrying and, if excessive, could erode the rise in real wages.