The yen has the potential to weaken further even with the intervention measures implemented by Japan.
Japan's former vice finance minister for international affairs, Eisuke Sakakibara, projected that the yen could depreciate further to 170 against the US dollar next year.
Sakakibara is known as 'Mr. Yen' for his efforts to influence currency exchange rates through verbal and official intervention in the late 1990s.
Commenting on reports of another intervention being implemented by the Japanese authorities since last Friday, he said most businessmen now predict the yen will continue to fall lower.
For now, the yen is strengthening at around 148.00 against the US dollar even though Japan has not yet confirmed its intervention.
Japan Has a History of Failed Interventions
Even if the authorities continue to intervene to defend the currency, it will not have a significant impact, Sakakibara said.
Analyst Kathy Lien says the only effective intervention is with other G7 countries.
However, he also added that interest rate hikes would be more effective in defending the yen.
BOJ Remains Dovish
Although the yen has experienced a sharp fall, the central bank of Japan (BOJ) is still seen as maintaining a dovish stance in its monetary policy.
However, Sakakibara expects the BOJ to start raising interest rates next year, once governor Haruhiko Kuroda's term ends in April 2023.
Once the leadership of the BOJ changes, and Japanese inflation overheats, then there is a possibility for a change in monetary policy.
