Traders are on alert for a rising risk of Japan intervening to support the yen, with a U.S. jobs report later Friday looming as a potential catalyst for sharp moves in the currency.

The yen is within reach of the ¥160 per dollar level, a breach of which would increase concern among policymakers in Tokyo about the weak currency’s impact on business and consumers. Strategists see a possible run toward this psychological level — if the jobs figures are strong. This in turn would bring the multidecade weak point of ¥161.95 into sight.

The yen depreciated as far as ¥158.55 on Wednesday, a level last seen in July, when Japan most recently waded into the currency market. It traded little changed at ¥158.26 as of 12:11 p.m. in Tokyo on Friday. Japanese markets will be shut on Monday for a holiday.

"Intervention is possible if the pair gets close to ¥160 after the jobs data, but there will likely be some verbal warnings first,” said Tsutomu Soma, a bond and currency trader at Monex in Tokyo. "The market will have no choice but to buy dollars if the jobs data is strong.”

Finance Minister Katsunobu Kato said on Tuesday that authorities would take appropriate action against excessive moves. Japan stepped into the currency market four times in 2024, spending almost $100 billion.

The yen has declined against the dollar for four straight years amid a wide gap between interest rates in Japan and the United States. With officials at the Federal Reserve signaling a slowdown in the pace of U.S. rate cuts, and the timing of another hike by Bank of Japan uncertain, the yen is vulnerable to selling.

Minutes from the Fed’s December policy meeting showed that officials were eager to slow the pace of rate reductions, and BOJ Gov. Kazuo Ueda delivered cautious messaging on rates last month after the policy board held borrowing costs unchanged.

Masato Kanda, who oversaw currency interventions totaling ¥24.5 trillion ($155 billion) as Japan’s top currency official from 2022 to 2024, said last year that a ¥10 move over one month against the dollar was rapid, and that a 4% move over two weeks was unusual and didn’t reflect fundamentals. A ¥10 depreciation from the Japanese currency’s strongest level reached anytime in the past 28 days would be around ¥159 against the dollar, while a 4% decline from the 14-day peak would be in the region of ¥162, based on Bloomberg calculations.

Complicating matters for currency traders, Japan showed last year that it could intervene to amplify moments of yen strength, not just to arrest sharp selloffs. And officials have indicated they are just as concerned by volatility and the pace of moves as they are about specific levels.

Yet for dollar-yen to "convincingly turn lower, the market will likely have to become more fearful of an imminent BOJ policy tightening,” wrote Jane Foley, the head of currency strategy at Rabobank in London, in a note.

The market for overnight index swaps suggests just a 43% chance of the BOJ hiking rates by the conclusion of its next meeting on Jan. 23 and 24.

Looking beyond the U.S. jobs data, Foley said a speech next week by BOJ Deputy Gov. Ryozo Himino would be important for hints on the central bank’s intention.

Ueda said on Monday that the BOJ would raise the policy rate if the economy continues to improve, avoiding giving a hint on the specific timing.