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

Most Read from Bloomberg

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 multi-decade 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 158.06 as of 8:17 a.m. in Tokyo.

“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 Inc. 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 US. With officials at the Federal Reserve signaling a slowdown in the pace of US 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 Governor Kazuo Ueda delivered cautious messaging on rates last month after the policy board held borrowing costs unchanged.

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 while traders speculate about lines in the sand for intervention, 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.

Story Continues