USD/JPY Plummets on Intervention Fear and BoJ Tightening Expectations
USD/JPY has fallen from 160.38 to 158 due to fear of intervention, not actual official action. The market is nervous near 160 because it remembers July's confirmed intervention that drove the pair from 163.97 to 155.22, a drop of over 8.75 Yen or more than 5%. Since traders are aware of this risk, they're reducing their short-Yen positions ahead of time.
The rapid repricing of BoJ tightening expectations is also supporting the yen's strength. OIS pricing points to around 96.5bp of cumulative BoJ tightening over the next 12 months, with September priced at an 84% probability and more tightening expected beyond it. BoJ board member Hajime Takata said 2026 will be a 'regime change' towards nimble and data-dependent hikes.
The upcoming US payroll report is crucial as it could either support or weaken the dollar against the yen. A weak NFP would likely create a relatively clear path for USD/JPY to drop towards 154.76-155.22 support zone, while a strong NFP would face two additional hurdles above 160: intervention memory and accelerating BoJ tightening.