The Japanese yen is approaching 160 per dollar again after falling for a second straight week, bringing renewed attention to the possibility of intervention by Japanese authorities in the foreign-exchange market.

Bloomberg reported on September 24 that the dollar was trading at about 157.85 yen in Tokyo morning dealings. The yen strengthened about 0.3% from a day earlier, but the move was not enough to reverse losses over the previous four trading sessions.

The yen's weakness is being driven mainly by the gap in monetary policy between the US and Japan. The Bank of Japan raised its benchmark interest rate by 0.25 percentage point on September 18, but subsequent remarks by Governor Kazuo Ueda fell short of market expectations for further tightening. In contrast, strong US economic data and persistent inflation concerns have fueled expectations of additional rate increases, supporting the dollar.

Markets are watching whether Japanese authorities would step into the market if the exchange rate reaches 160 yen per dollar. Carol Kong, a foreign-exchange strategist at Commonwealth Bank of Australia, said the rate could soon move above 160 if US Treasury yields continue to rise. A swift break past that level would significantly raise the chances of intervention, she added.

Still, intervention alone may not be enough to stop the yen's slide. Matthew Ryan, head of market strategy at Ebury Partners, said it would be difficult for the Japanese government to curb the currency's decline even if it intervenes, unless the Bank of Japan signals a clear willingness to keep raising rates.

Whether the US joins such an effort is another key variable. The US bought yen alongside Japan earlier this summer, and US Treasury Secretary Scott Bessent has repeatedly expressed support for a stronger yen. Ray Attrill, head of foreign-exchange strategy at National Australia Bank, said unilateral intervention by Japan may not have a lasting effect, making further US support important.

Speculative trading could also weigh on the yen. UBS said most speculative short positions betting on yen weakness had recently been unwound, leaving room for investors to rebuild bearish bets on the currency. The bank said the wide US-Japan interest-rate gap still leaves open the possibility of further yen declines.