(Bloomberg) -- The yen fell to a fresh 34-year low against the dollar after the Bank of Japan indicated monetary policy will stay easy, heightening speculation authorities may soon intervene in the market to stop the currency’s decline.

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Japan’s currency weakened as much as 1.8% on the day and touched a session low of 158.33 per dollar, with losses accelerating in late trading in New York. The declines started earlier the day, following a policy meeting from the BOJ, in which the central bank kept its key interest rate unchanged and governor Kazuo Ueda said little to support the yen during a news conference.

Losses deepened even after a gauge of underlying US inflation matched expectations, tempering concerns of persistent price pressures that could delay rate cuts from the Federal Reserve.

In the run-up to the BOJ meeting, traders boosted short yen positions. Combined bets by hedge funds and asset managers on the currency’s weakness reached 184,180 contracts as of Tuesday, the most on record according to Commodity Futures Trading Commission data going back to 2006.

Japan’s currency has already lost almost 11% of its value versus the greenback this year, the worst performer among the Group-of-10 currencies. Driving the depreciation is the yawning gap between the interest rates in the US — which are at highest in decades after the Fed’s aggressive tightening cycle last year — and those in Japan, where borrowing costs remain stubbornly low near zero.

Read more: Bank of Japan Stands Pat on Rates and Bond Buying

“This is incredible weakness,” said Justin Onuekwusi, chief investment officer at St James Place Management. “Surely this level of weakness will be causing concern. We think yen has gone too far and our perspective would be to lean against it.”

Policymakers have repeatedly warned that depreciation won’t be tolerated if it goes too far too fast. Finance Minister Shunichi Suzuki reiterated after the BOJ meeting that the government will respond appropriately to foreign exchange moves.

The Topix share index rose 0.9% after the BOJ decision, with real estate companies extending gains. The yield on the benchmark 10-year bond slipped to 0.925% from 0.93% earlier in the day.

“And yet again, BOJ has proved that it can surprise dovish to even the most dovish expectation on The Street,” said Charu Chanana, a strategist at Saxo Capital Markets. “We are back to waiting for an intervention to stop the rout in the yen. But any intervention, if not coordinated and without the support of a hawkish policy messaging, will still be futile,” she said.

In a trilateral statement last week, the US, Japan and South Korea said they will continue to consult closely on foreign-exchange market developments while acknowledging serious concerns of Japan and Korea about the recent sharp depreciation in their currencies.

Based on an analysis of comments from Masato Kanda, the top currency official at finance ministry, 157.60 versus the dollar is one key level to watch. The ministry will release intervention figures for the March 28-April 25 period on April 30, while data that includes today will be released on May 31.

Other potential triggers are public holidays in Japan on Monday and Friday next week, which bring the risk of volatility amid thin trading.

“Should the yen fall further from here, like after the BOJ decision in September 2022, the possibility of intervention will increase,” said Hirofumi Suzuki, chief currency strategist at Sumitomo Mitsui Banking Corp. “It is not the level but it’s the speed that will trigger the action.”

Japan conducted its first yen-buying intervention since 1998 in September 2022 when then governor Haruhiko Kuroda made dovish comments following a policy decision and the currency sank. Japan entered into the market in three occasions through October of that year, spending over ¥9 trillion ($57 billion).

--With assistance from Winnie Hsu, Masaki Kondo, Vassilis Karamanis, Carter Johnson and Constantine Courcoulas.

(Updates yen moves during late session in New York, charts)

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