The "attack and defense battle" at the 160 level resumes: Japanese authorities release strong intervention signals, the yen temporarily breaks free from its near two-year low.

After multiple warnings indicating Japan is prepared for possible intervention in the currency market to support the yen, the yen exchange rate has rebounded slightly from its lowest level since July 2024. Japan's top foreign exchange official stated that if the current situation persists, the government may take decisive action. Subsequently, the yen to US dollar exchange rate rose back below the key level of 160. Bank of Japan Governor Haruhiko Kuroda then pointed out that exchange rate fluctuations have a significant impact on the economy and prices, causing the yen to further increase in value. As of the time of writing, the yen to US dollar exchange rate is at 159.90. After weakening for four consecutive trading days, the yen exchange rate fell to 160.46 earlier this week. Due to heightened tensions in Iran pushing up oil prices and exacerbating inflation concerns, the yen and Japanese government bonds have been dragged lower. Traders are closely watching the key level of 160, as authorities intervened near this level in 2024. Yujiro Goto, Chief Foreign Exchange Strategist at Nomura Securities, stated, "The probability of Japan intervening in the currency market has significantly increased." He added that the volatility in the Japanese bond market makes it "more necessary than ever to buy yen for intervention." At the most recent policy meeting, considering the uncertainty in the Middle East, the Bank of Japan decided to keep its policy unchanged but still left open the possibility of a rate hike in April. Overnight index swaps indicate that the market estimates a 70% probability of the Bank of Japan hiking rates next month.