Yen intervention risk is back in focus with Japan returning from holiday as a two-week long slide in the currency puts it back within reach of the closely watched level of 160 per dollar. A slight gain of 0.3% to around 157.85 versus the greenback in Thursday morning trading in Tokyo has had little impact against the past four days of losses. Strategists see 160 emerging again as a test of Japan’s tolerance for yen weakness given its continued depreciation in the wake of the central bank’s policy meeting on Sept. 18. While the Bank of Japan accelerated its tightening cycle, there was dissent on the board and its US counterpart looks to be on a more hawkish path.

USD/JPY could soon breach 160 if US yields keep rising and the market continues to test Japan’s resolve to defend the JPY, said Carol Kong, a currency strategist at Commonwealth Bank of Australia. A rapid move through that threshold would materially increase the likelihood of official action, particularly given the recent reported rate check and precedent for coordinated intervention, she added. The dollar has been supported by rising Treasury yields, robust US economic data and persistent inflation concerns that have prompted traders to price a more aggressive Federal Reserve tightening path. While the BOJ raised rates by 25 basis points last Friday, Governor Kazuo Ueda’s subsequent remarks fell short of increasingly hawkish market expectations.

The yen remains exposed to further near-term weakness if markets are unconvinced that more BOJ tightening is coming, said Matthew Ryan, head of market strategy at Ebury Partners Ltd. FX intervention remains a blunt tool to prop up currencies, and without a forceful monetary policy response it will be difficult for Japanese authorities to rein in the selloff in the yen. Still, some strategists see the growing threat of intervention as something that may itself contain declines. There is every chance we could be headed back to 160, though I’d expect the threat of intervention to prevent a breach, said Ray Attrill, head of FX strategy at National Australia Bank Ltd. Whether intervention would produce a lasting reversal may depend heavily on Washington’s participation.

Japan’s unilateral operations have historically struggled to generate sustained moves when monetary-policy fundamentals remained unfavorable, and Attrill said markets would likely shrug off another solo operation relatively quickly. The US joined Japan in buying yen this summer, raising the stakes for investors betting against the currency. Treasury Secretary Scott Bessent has repeatedly signaled support for a stronger yen and has effectively challenged traders to test his resolve. That puts Bessent’s credibility in play should dollar-yen return to 160, Attrill said. Further US support could be conditional on Japan demonstrating a willingness to raise rates faster or further than markets currently expect, he added. A shift in speculative positioning could add to pressure on the yen. UBS Group AG strategists including Shahab Jalinoos said the latest data show speculative yen shorts have been fully washed out, creating room for investors to rebuild bearish positions given the ongoing constructive environment for carry trades and still-wide US-Japan rate differentials. Hedge funds turned positive on the yen for the first time since July 2025 in the week ending Sept. 15, according to the latest Commodity Futures Trading Commission data. The funds held about ¥251 billion ($1.6 billion) tied to bets that the yen will strengthen, data compiled by Bloomberg show.