• Yen Nears Critical Level
  The yen is hovering near the psychological 160-per-dollar mark, raising fears of intervention by Japanese policymakers. A breach could trigger further concerns, bringing the multi-decade weak point of 161.95 into focus.
• US Jobs Report Looms Large
  The upcoming US jobs report is a potential catalyst. Strong employment data may strengthen the dollar, pressuring the yen further and increasing intervention risks. 

• Recent Yen Movements
  The yen weakened to 158.55 per dollar on Wednesday, the lowest level since Japan last intervened in July 2024. It traded slightly firmer at 158.26 as of Friday midday in Tokyo. 

• Japanese Policymakers Ready to Act
  Finance Minister Katsunobu Kato reiterated this week that authorities are prepared to take “appropriate action” against excessive yen movements. Japan spent nearly $100 billion intervening in 2024 alone. 

• Fed and BOJ Policy Divergence
  The yen’s depreciation reflects the wide gap between US and Japanese interest rates. While the Federal Reserve slows its rate-cutting pace, the BOJ remains cautious on potential hikes, leaving the yen vulnerable. 

• Historical Intervention Benchmarks
  Former top currency official Masato Kanda highlighted thresholds for intervention: a 10-yen move within a month or a 4% shift in two weeks. Current yen levels are nearing these benchmarks. 

• Focus on Volatility, Not Just Levels
  Japanese officials are as concerned about the pace of yen movements as they are about specific levels, signaling potential action even during periods of yen strength.

• Upcoming Events to Watch

BOJ Meeting (Jan. 23-24): The market predicts a 43% chance of a rate hike.

Speech by Deputy Governor Ryozo Himino: Expected next week, it may provide insights into the BOJ’s policy direction. 

What’s next?

The yen’s current situation reflects the delicate balancing act faced by Japanese policymakers. While intervention may provide short-term stability, the underlying issue of monetary policy divergence between the BOJ and the Federal Reserve remains unaddressed.

A strong US jobs report could exacerbate the yen’s decline, increasing intervention risks. However, repeated interventions may only delay the inevitable need for a more decisive policy shift by the BOJ to stabilize the currency in the long term. This moment is crucial for Japan to navigate global market dynamics while safeguarding its economic interests.