Analysts are largely split into two camps. Some expect the yen to strengthen to breach its lower limit of 103 per dollar, believing the worst of the Japanese economic data currently affecting the currency to be priced in.
Others, however, believe that against the recent weak economic background, pessimism is taking a toll on the currency, and the break-out could be to the upside, breaching 112. This view is bolstered by expectations of continued interest rate hikes in the US supported by the maintenance of a strong currency policy by the government.
Either way, the impact the current trading range is having on the country's exporters is limited. Joe Kraft, head of foreign exchange at Morgan Stanley in Tokyo, notes that in general Japanese exporters' hedge ratios are relatively high and are hedged up to November "so in that regard there's no sense of panic".
Still, problems will prevail if the yen appreciates significantly and breaks 105, said Brown Brothers Harriman. Jun Kitazawa, assistant vice-president at the bank in Tokyo, said most companies have set their cost equivalent rate at 105 and a breach beyond that level would cause a rush to sell dollars.
Mike Newton, currency strategist at HSBC in Hong Kong, believes there are four factors to watch out for in terms of the yen: what will happen to the Nikkei; the outlook for Japanese government bond yields; the impact of the oil price on the Japanese current account; and the trade outlook with China.