Despite verbal intervention from authorities, the Japanese yen reaches a new 34-year low.

• Since the Bank of Japan's last meeting in March, the yen has weakened by 4.2%.
• The strength of the dollar has contributed to the weakness of the yen, while U.S. inflation has prompted Federal Reserve Chair Jerome Powell to suggest that rate cuts may not occur in the near future.
• It is unlikely that the BOJ will take decisive action to strengthen the yen at its meeting on Friday, according to analysts.

On Thursday, the Canadian dollar fell to a new 34-year low against the U.S. dollar, despite the greenback's continued strength.

Despite verbal warnings from Japanese authorities, the Bank of Japan is set to release its monetary policy decision on Friday, which may reveal its weaknesses.

Some market watchers speculated that the 155 level would prompt intervention after the currency languished at multi-decade lows for a month.

Shusuke Yamada, head of Japan currency and rates strategy at BofA Securities Japan, stated in a Tuesday note that for the BOJ to support the yen, it should recognize that policy has been excessively accommodative, acknowledge that the next hike is imminent as in June, and admit that the terminal rate would be higher than what the market has priced. However, he added that this is unlikely to happen at this week's meeting.

The strength of the dollar has contributed to the weakness of the yen, while U.S. inflation has prompted Federal Reserve Chair Jerome Powell to suggest that rate cuts may not occur in the near future.

According to Idanna Appio, portfolio manager at First Eagle Investments, the Japanese authorities' verbal intervention seems unlikely to be effective because the move in the currency is reflecting dollar strength against most currencies, not just the yen.

This week's BOJ meeting will be crucial for investors as they track inflation projections amidst a weaker yen, rising oil prices, and robust wage growth.

Closing in on an intervention?

Since the BOJ's March meeting, Japanese authorities and investors are concerned about the 4.2% weakening of the yen.

Analysts believe that a coordinated intervention with South Korea could politically and economically benefit both nations if it successfully supports the yen and the Korean won.

Despite markets hoping for quick action from Japanese authorities to stop the yen's decline, analysts believe it is unlikely that the central bank or the Ministry of Finance will act immediately.

Vishnu Varathan, head of economics and strategy for Asia at Mizuho Bank, wrote in a note that the FX tail will not be allowed to wag the dog.

Instead of being a catalyst for the BOJ, Varathan said that yen weakness is a policy constraint. He noted that the Japanese central bank will likely maintain its "dovish restraint" when adjusting rates. Instead, Varathan suggested that authorities could use flexible bond purchase signals for intervention.