Editor's note: David Scutt is a senior market analyst with GAIN Capital. The article reflects the author's opinions and not necessarily the views of CGTN.   

The Bank of Japan (BOJ) held interest rates near zero last Thursday. The latest policy decision has left more questions than answers, as the Japanese yen plunged to another multi-decade low against the U.S. dollar (The USD/JPY pairing broke above 158 last Friday before spiking above 160 this Monday), while its losses versus other major currencies has accelerated too.

Traders were looking for a firmer commitment from the BOJ towards additional policy tightening, and more to the point about any plans to stem the slumping yen. But they got nothing. Governor Kazuo Ueda refused to commen about the currency situation and instead reiterated that the BOJ could still raise rates again at some point.

Due to the BOJ's lack of intent, traders are persisting in favoring higher-yielding foreign currencies over the yen. That is despite the BOJ's first rate hike in March, which marked a 17-year gap. Though the policy rate has returned above zero for the first time in eight years, it has failed to impede the yen's depreciation. The latest BOJ meeting was again a failure as far as halting the yen's plunge is concerned.

USD/JPY spikes above 160, highest level since 1990

If Japan's Ministry of Finance was looking for a trigger to instruct the BOJ to intervene in currency markets, it has just been provided with a big one. Because out of nowhere, on a public holiday in Japan, USD/JPY just suddenly spiked over 1 percent, seeing it briefly trade above 160 for the first time since 1990, taking out a key topside level.

USD/JPY spike driven by speculative forces

While a USD/JPY upside is not unusual, what makes this move different to others is that it was not underpinned by any significant shift in fundamentals. U.S. Treasuries are not trading due to the public holiday in Tokyo meaning the key driver of USD/JPY – ballooning yield differentials between the U.S. and Japan – did not contribute to upward thrust. Nor was there any significant change in risk appetite in Asia which is broadly a continuation of what was seen in Europe and North America on Friday.

... And a deliberate attempt to bring an official policy response

No, the move looks entirely speculative. And, if I'm being honest, a deliberate attempt from a party or parties to bring the Ministry of Finance from the sidelines. Finance Minister Shunichi Suzuki, MOF's Vice Minister of Finance for International Affairs Masato Kanda and other senior Japanese government officials have been warning for months about taking action to quash speculative movements. If they do not instruct the BOJ to intervene following Monday's abrupt bounce, when will they ever?

Traders should now be on heightened alert for this risk.

Key near-term USD/JPY levels

After 160, the next topside level for USD/JPY is 165. On the downside, USD/JPY has been supported on dips below uptrend support dating back to early April, including a suspected "market check" from the MOF last Friday. The low of 155 hit then is the first level for traders to watch with 152 the next major level after that.