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Yesterday, we discussed the SNB and gave 4 reasons why it will keep its peg on EUR/CHF.

Today, I think it’s only fair that we tackle the Bank of Japan (BOJ) and the likelihood that it will have to defend its currency from further gains.

Let’s cut to the chase: right now, intervention risk is low. Yes, USD/JPY is still within striking range of its 2-month lows, but it’s not yet at levels it was trading in when the BOJ last decided to step in.

If you recall, the BOJ had waited until USD/JPY hit 76.00 before it intervened and sold off the yen last October. So while the central bank may not feel completely comfortable with where the yen is standing at the moment, it has seen worse.

Perhaps that’s why many believe that we’ll need to see new lows before we can really expect action from the BOJ. Barclays Capital, for one, thinks that USD/JPY will have to trade below 78.00 before the BOJ will even begin to get aggressive with its threats.

Not far from Barclays’ analysis, MIG Bank warns of a possible intervention below 77.65. Meanwhile, Citibank believes it’ll take a fresh all-time low below 75.00 for the BOJ to act again because the markets have already become numb to threats of “decisive steps.”

Of course, it works to the benefit of the BOJ that risk sentiment seems to be holding the yen down at the moment. New developments in the euro zone, such as the ECB’s pledge to do all it takes to keep the euro alive, is inciting risk appetite and fueling bets that EU leaders have a grand plan in store for the markets.

But this downward pressure on the yen may not last long. There are a couple of things that could send USD/JPY back down into the intervention watch zone.

First, there’s the ever-present QE3 threat. If the Fed signals willingness to undertake QE3 in its FOMC statement on Thursday, the dollar could weaken once again. If you recall, in the last two instances leading to quantitative easing, the dollar was heavily sold off in favor of the low-yielding yen.

Second is Japan’s deteriorating economic situation. Last Wednesday, the BOJ cautioned the markets that it would not hesitate to pull the trigger on more stimulus measures to boost the economy, fight off deflation (Japan’s most recent core CPI was at -0.2%), and weaken the yen.

Overall, despite the risks present, it seems that the yen is in no immediate danger of either monetary easing or direct currency intervention. Market sentiment has been positive as of late, which has enabled higher-yielding currencies to rally.

USD/JPY Daily Chart

The daily chart of USD/JPY can attest to this, as it has found some major support at the 78.00 level. Until 78.00 breaks, the BOJ will probably hold off on any intervention moves.