(Bloomberg) -- The yen resumed its advance in late trading in Tokyo after an earlier pause in the rally triggered by Japan’s first intervention in the currency market since 2024.

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The Japanese currency strengthened as much as 0.7% to 155.5 to the dollar, passing the level reached during Thursday’s 3% surge when the government acted to buy yen and sell dollars. It traded around 156.37 as of 5:34 p.m. Japan time.

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While the nation’s top currency official has declined to confirm intervention, a person familiar with the matter said authorities had entered the market. Economic officials in the US were notified ahead of the move, according to another person familiar with the matter.

Without additional intervention, the yen’s intervention-fueled rally is in danger of evaporating, according to traders who see an increasing likelihood that Japan will have to step into the market again to shore up the exchange rate.

An erosion of initial gains in the yen would follow the pattern seen around this time in 2024, when Japan came into the market on several occasions to address weakness. Atsushi Mimura, vice finance minister for international affairs, offered a veiled warning of this to traders on Friday ahead of the May 4-6 Golden Week break in Japan.

“I will not comment on future developments, but I will point out that we are just at the beginning of a long holiday period,” Mimura said. “We are in extremely close contact with the US, and I believe we share our assessments of the situation and our actions.”

Mimura extended his warning to energy traders, adding that, “generally speaking, we are always ready to act regarding crude oil futures transactions.”

Back in 2024, the government intervened again during the same holiday. “With the option of a second intervention in mind, authorities likely want to push the dollar down to around 153–154 yen,” said Takeru Yamamoto, a trader at Sumitomo Mitsui Trust Bank in New York.

Japanese authorities spent a total of around $100 billion in buying yen several times in 2024 after the currency tumbled to around 160.17. Additional steps were taken on days when the yen reached 157.99, 161.76 and 159.45.

CME Group recorded a surge in activity in Japanese yen futures following the intervention, with trading in JPY/USD futures exceeding 631,000 contracts on Thursday — the highest daily volume on record, according to a company spokesperson.

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“The price action reinforces the view that 160 is the line in the sand for Japan’s Ministry of Finance,” said Carol Kong, a strategist at Commonwealth Bank of Australia. “But given the risk of a re-escalation in the Iran war and the Bank of Japan’s non-committal stance on rate hikes, USD/JPY looks set to recover soon, which means yesterday’s intervention might just be the first round.”

While officials have consistently said they are targeting excessive volatility rather than specific levels, Thursday’s intervention didn’t follow an abrupt bout of weakness. But with the Federal Reserve looking less dovish and the Bank of Japan showing reluctance to commit to a June rate hike, the yen looked set for further weakness. The latest move by Japanese authorities suggests growing discomfort with its prolonged weakness, a factor that can raise import costs and fuel inflation.

Before its sudden rebound, the yen had weakened beyond 160 per dollar in the wake of decisions this week by the BOJ and the Fed to hold interest rates steady. The US rate advantage over Japan’s benchmark has contributed to the greenback’s strength against the yen.

Official data from the Ministry of Finance won’t be available until the end of the month, as settlement for Thursday’s action would fall on May 7 after the holiday. Traders will instead look to Bank of Japan accounts data due later Friday for early clues.

Even if further intervention follows, its impact may be limited, said Neil Newman, head of strategy at Astris Advisory Japan. “Intervention has never been a long-term solution,” he said. “The long-term fix is to narrow the interest rate differential between the USD and JPY through rate rises from BOJ and rate cuts from the Fed, and effectively kill off the carry trade.”

--With assistance from Momoka Yokoyama and Takashi Umekawa.

(Updates yen price)

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