Photo/Illutration Bank of Japan Governor Kazuo Ueda speaks to reporters after meeting with Prime Minister Fumio Kishida on March 19. (Takeshi Iwashita)

The yen’s slide to fresh 34-year lows is likely to force Bank of Japan Governor Kazuo Ueda to walk a delicate line in guiding monetary policy this week as he tries to maintain a calibrated path to exiting ultra-easy rates without upending the currency.

The BOJ chief will be mindful of avoiding the episode of 2022, when his predecessor’s dovish remarks triggered a yen plunge that forced Tokyo to intervene to prop up the currency.

Ueda has ruled out the chance of aggressive rate hikes due to Japan’s fragile economy, which has in part fed expectations of low-for-longer rates and emboldened yen bears.

In recent comments, however, Ueda has dropped hints the BOJ could raise borrowing costs again later this year, although that has hardly done anything to reverse the yen’s inexorable slide over the past few months.

The BOJ is expected to keep interest rates steady at a two-day meeting ending on Friday, and project inflation to stay near its 2% target in coming years on prospects of steady wage gains.

The prospect of Japanese rates staying low for an extended period and expectations for a delayed start to U.S. rate cuts have continued to push down the yen despite aggressive jawboning by Japanese authorities.

The yen fell below 155 to the dollar on Thursday, a level seen as authorities’ line in the sand that heightens the chance of currency intervention.

The dollar rose as high as 155.37 yen on Wednesday, its strongest since mid-1990, before falling back in choppy trading. It was last at 155.29 in Asia on Thursday.

Markets are focusing on whether Ueda will offer a more hawkish tone on prospects of a near-term interest rate hike.

“The BOJ won’t hike rates just for the sake of preventing yen declines,” said former BOJ official Nobuyasu Atago.

“But he may repeat his recent commentary that the BOJ would respond if yen moves have a big impact on the economy and prices. If that keeps markets guessing the timing of a rate hike could be pushed forward, it would be effective jawboning.”

Ueda will hold a press conference after the two-day meeting concludes on Friday.

Some analysts point to the risk of a repeat of September 2022, when Japan intervened to prop up the yen after it plunged on former BOJ Governor Haruhiko Kuroda’s post-meeting remarks stressing the bank’s resolve to maintain ultra-loose policy.

In Japan, the Ministry of Finance, not the BOJ, is in charge of deciding when to intervene in the currency market. The decision is highly political and typically reflects the administration’s views on whether yen moves warrant action.

There seems to be no consensus within the ruling Liberal Democratic Party (LDP), however, on whether the time is rife for currency intervention.

Japan’s ruling party is not yet in active discussion on what yen levels would be deemed worth intervening in the market, though the currency’s slide towards 160 to the dollar could prod policymakers to act, party executive, Takao Ochi, told Reuters.

Markets are also focusing on whether the BOJ will leave unchanged guidance it offered in March to keep buying government bonds around the current pace of 6 trillion yen per month.

A removal or tweak of the guidance could be interpreted by markets as suggesting that the BOJ will soon taper its bond buying to allow bond yields to rise more, analysts say.

Alternately, the BOJ may announce a modest decline in its bond buying plans for May, which will be released after the policy meeting, some analysts say.

Speaking at a seminar in Washington, Ueda last week has said the BOJ will eventually start to shrink its balance sheet and roll out the process irrespective of the state of the economy.

But Ueda has stressed that the BOJ won’t dramatically change the pace of bond buying for the time being and won’t use the size of its asset purchases as a monetary policy tool.

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