Tonight is Non-Farm Payroll night. If the yen breaks the level, Japan will have to intervene?

The pressure of yen depreciation intensifies, will tonight's non-farm data become the trigger for intervention? As the yen continues to weaken, on Wednesday, the USD/JPY exchange rate briefly rose to 158.55, reaching the lowest level since Japan's last intervention in the foreign exchange market in July last year, approaching the 160 mark. Some analysts believe that if the U.S. December non-farm data released tonight is strong and does not support expectations for a Federal Reserve rate cut, it may push the yen further below 160, triggering intervention from the Japanese Ministry of Finance, with the decades-low point of 161.95 becoming the next important psychological barrier. Tsutomu Soma, a bond and currency trader at Tokyo Monex, stated: “If the currency pair approaches 160 after the employment data is released, intervention may occur, but there may first be some verbal warnings.” “If the employment data is strong, the market will have no choice but to buy dollars.” On Tuesday, Japanese Finance Minister Kato Katsunobu stated that authorities would take appropriate action against excessive exchange rate fluctuations. In 2024, Japan has intervened in the foreign exchange market four times, spending nearly $100 billion in total. The U.S.-Japan interest rate differential is a major factor driving the yen's depreciation. The minutes from the Federal Reserve's December meeting showed that officials were eager to slow the pace of rate cuts; meanwhile, Bank of Japan Governor Kazuo Ueda expressed a cautious attitude towards rate hikes after maintaining the policy interest rate last month. According to swap market data, the market expects only a 43% probability of a Bank of Japan rate hike in January, indicating that the yen is still under significant selling pressure. Jane Foley, head of currency strategy at Rabobank in London, believes that to make the USD/JPY exchange rate “clearly turn downward,” “the market may need to be more concerned about the Bank of Japan's tightening pace.”