Strategists Steve Englander and Nicholas Chia at Standard Chartered noted in a client report on Wednesday that the USD/JPY pair's return near the 158 level indicates Tokyo may need to undertake further intervention if it aims to restrain market bearish sentiment towards the yen.

The strategists suggested that Japanese authorities may have re-established a defensive line for the yen within the high 150s to 160 range.

The USD/JPY pair rose 0.2% overnight to 157.90.

Standard Chartered believes that potential interest rate hikes by Japan would provide limited support for the yen; the interest rate market currently anticipates the Bank of Japan will implement approximately 45 basis points of further rate hikes by year-end, a level at the lower end of their 2026 forecast range.

The strategists pointed out that the Bank of Japan is among the few central banks for which market expectations for 2026 rate hikes have been downgraded since February.

Overnight Index Swaps (OIS) linked to Federal Reserve meeting dates currently price in about 24 basis points of rate hikes by the June 2027 policy meeting.

Recent interventions in the yen have shown limited impact beyond short-term reactions and could potentially shift the currency from being slightly undervalued to slightly overvalued.