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By Bloomberg

The yen’s slide to much beyond 120 per dollar will have to wait until after the Dec. 14 general election -- at least if the Japanese government has its say.

Officials are likely to continue verbal intervention to prevent excessive yen declines, according to Nomura Holdings Inc. strategist Yunosuke Ikeda, after the currency tumbled from about 109 per dollar in late October to a seven-year low of 119.95 today. Finance Minister Taro Aso warned on Nov. 21 that the yen was falling too fast, as it raced to its biggest monthly drop since the start of 2013, spurred by an unexpected expansion of Bank of Japan stimulus on Oct. 31.

Prime Minister Shinzo Abe called a snap election to renew his mandate for reflationary policies centered on a weak yen. The currency’s almost 30 percent drop against the dollar since he came to power two years ago has squeezed consumers with costlier imports. The yen is 35 percent undervalued versus its U.S. peer, according to a gauge of purchasing power. Opposition to Abe’s economic policies exceeded support by 47.3 percent to 43.6 percent in a Nov. 29 Kyodo News poll.

“The government will likely try to adjust the speed of the yen’s decline as it gets to around 120 per dollar,” Ikeda, the Tokyo-based head of currency strategy at Japan’s biggest brokerage, said by phone Dec. 2. “A rapid depreciation gives the opposition more ammunition to criticize them for making people’s lives harder.”

BOJ board member Takehiro Sato said today that it is uncertain whether the recent further depreciation of the yen will support a recovery in exports, speaking in Kochi, Japan.

On Guard

Investors are positioning for possible yen strength amid increased volatility in the run up to the election. The premium on options to buy the yen against the dollar over the next week outstripped those to sell, while the opposite was true over a one-month horizon, according to data compiled by Bloomberg on 25-delta risk reversals. Measures of implied volatility showed traders predict wider price swings in the next week than over the next six months.

Contracts worth $3.01 billion that would come into force at 120 yen are expiring today, according to data compiled by Bloomberg.

In addition to Aso’s comments, ruling Liberal Democratic Party Secretary-General Sadakazu Tanigaki commented on at least two occasions last month about yen depreciation, saying it affected people’s livelihoods and describing the impact as “negative”. Last week, Abe’s hand-picked central bank Governor Haruhiko Kuroda said a weak yen weighs on households.

The yen has tumbled 9 percent since Oct. 30, the day before the central bank expanded the annual target for expanding the monetary base to 80 trillion yen ($667 billion).

Longer term, forecasters including Nomura see BOJ stimulus helping to push the yen even lower by the end of next year. The median forecast among analysts surveyed by Bloomberg News is for a decline to 124 yen per dollar.

“The government will be happy as long as the decline is gradual,” Nomura’s Ikeda said. “The trend is still for a weaker yen.”