A Reuters poll shows that the Japanese yen will likely remain weaker than the key psychological level of 130 per dollar over the next six months, as a gap between Japanese and U.S. benchmark yields weighs on the currency.
The yen has fallen against the dollar this year as the Bank of Japan BOJ resolutely stuck to its ultra dovish monetary policy, contrary to a growing number of hawkish central banks overseas.
There is a tendency to weakness in the currency due to widening interest rate differentials between Japan and elsewhere.
In the July 1 -- 6 poll, the median forecast was for Japan's currency to strengthen to 131 per dollar in six months, compared to 126.84 in last month's forecast, meaning it would stay weaker than the 130 yen-per-dollar level.
The Japanese currency hit its lowest level against the dollar since 1998, at 137 last week.
Seven of 61 respondents projected the yen to be at a weaker level than that six months from now, including four forecasting it to be at 140.
Despite the yen's rapid decline this year - it has lost about 15% against the dollar - Japan was unlikely to intervene in the FX market to stop it from sliding, 45% of 22 poll respondents said.
If JPY depreciates further, the BOJ will probably have to abandon the yield curve control policy in the coming months. Roberto Cobo Garcia, head of FX strategy at BBVA, said direct intervention is unlikely.
Some market players have speculated that the country could conduct yen-buying intervention to arrest sharp falls in the currency after authorities stepped up their warnings about its strong declines.
While the BOJ has firmly rejected the idea of adjusting its policy in the face of the yen's falls, some strategists said it would be the central bank, not the government, that would move first if policymakers were to act in response to its declines.
A rapid depreciation of the yen has had a negative impact on the economy, according to Khoon Goh, head of Asia research at the ANZ Bank.
The situation could change if the JPY weakness is not enough for the BOJ to change its monetary policy stance, if a push towards 140 -- 150. Ten of 22 poll respondents said Japan wouldn't intervene.
That was compared to six respondents who predicted intervention at the 140 yen per dollar level, and four who chose 145 as the likely trigger level. One selected 150 as the dollar yen rate at which Japan would intervene, while another said 155 or weaker.
The last time the authorities intervened to prop up the yen was in 1998.