The Japanese yen against the US dollar exchange rate fell 0.4% to 160.4 on Wednesday, the lowest level since 1986, breaking the level when Japan intervened in the foreign exchange market in April, sparking speculation that the authorities may soon be forced to support the yen again.

Before the US market, following the oral warning issued by Japan's chief foreign exchange official, Makoto Kanda, the yen against the US dollar exchange rate fell 40 points in the short term, but quickly rebounded, reaching a high of 160.48, a new high since 1986. Due to the weakness of the yen, the US dollar index reached 106, the first time since May 1. The strong US dollar dragged down precious metals, and spot gold fell below $2,300.

Makoto Kanda recently stated that he is seriously concerned about the recent sharp depreciation of the yen and will take appropriate measures to deal with foreign exchange issues as needed. He pointed out that the current volatility of the yen is undoubtedly unilateral.

Since the beginning of this year, the yen has depreciated by more than 12%, which has led to an increase in import prices, damaged the interests of Japanese consumers, and made companies increasingly anxious.

Although Japan has raised borrowing costs, the huge interest rate difference between the United States and Japan is still putting pressure on the yen. The next major pain point for the yen may come from the reading of the inflation indicators favored by the Federal Reserve on Friday, which is the key to its monetary policy outlook.

Erik Nelson, a macro strategist at Wells Fargo & Co in London, said: "The recent comments by the Japanese Ministry of Finance indicate that people's concerns have increased." He predicts that officials will hold out until the yen against the US dollar falls to 165 before entering the market. Banks, including Bank of America, also believe that this level is the new "bottom line" for the authorities.

Japan faces great risks, having spent a record ¥9.8tn ($61.1bn) in recent rounds of intervention. Citigroup estimates the country has the funds of between $200bn and $300bn to support any action.

However, the response of Japanese officials this week has been limited to verbal warnings.

Previously, Japan's finance minister, Taro Aso, said they were closely monitoring market developments and would take all possible measures as needed. Makoto Kanda warned on Monday that the authorities were ready to intervene around the clock if necessary, while reiterating that they were not intervening in specific levels.

Win Thin, head of global market strategy at Brown Brothers Harriman & Co in New York, said: "If the volatility of the yen against the US dollar begins to become chaotic above the 160 level, the Japanese authorities may intervene to stabilize the currency pair's trend. Buy the US dollar against the yen before the Bank of Japan takes a stronger stance, and the resistance is minimal."

Cameron Crise, a macro strategist at Bloomberg, said that according to my model, the level around 161 or slightly higher than 161 is still the most likely threshold for the Japanese authorities to intervene.

Japan's measures to support its currency have attracted overseas attention, and the US Treasury Department last week listed Japan on its "currency manipulation monitoring list."

Although the United States did not list Japan (or any other trading partner) as a currency manipulator, US officials wrote that "intervention should be limited to very special circumstances and conducted after appropriate prior consultation in large, free-market foreign exchange markets."

However, US data released on Friday may alleviate some pressure on the yen. Economists predict that the core personal consumption expenditure (PCE) inflation rate in June will slow down, which may strengthen the Fed's reason for lowering borrowing costs this year.

Many strategists say that the volatility of the foreign exchange market is still relatively low, and the authorities are currently unable to intervene. For most of this month, the implied volatility of the US dollar against the yen for one month has remained below 9%, significantly lower than the 12.4% at the end of April.

Roberto Cobo Garcia, director of G-10 forex strategy at Banco Santander SA in Madrid, Spain, said: "Considering the quarterly end demand for the US dollar and the fact that market volatility is still under control, the Japanese authorities may wait for another period of time before intervening again. If they intervene again, volatility needs to further rise."