Yen Strengthens on Safe-Haven Demand

The Japanese yen weakened toward 159.5 per dollar on Monday, nearing the key 160 level that has previously triggered market intervention. Top currency chief Atsushi Mimura said the government is prepared to take all necessary steps to respond to foreign exchange moves. Mimura also highlighted the impact of the prolonged Middle East conflict and rising oil prices on the yen, noting that currency fluctuations affect people’s daily lives. The yen failed to hold gains from last week, when the Bank of Japan kept its policy rate steady but signaled a bias toward tighter monetary policy to counter inflationary pressures from surging oil prices. Board member Hajime Takata dissented, recommending a 25 basis point hike to 1% for a second consecutive meeting. BOJ Governor Kazuo Ueda added that a rate increase remains possible if the economic slowdown from the Iran conflict proves temporary.

The Japanese yen strengthened to around 158 per dollar on Friday after nearly hitting the 160 level earlier this week, supported by the Bank of Japan’s bias for tighter monetary policy to counter inflationary pressures from surging oil prices linked to the Middle East conflict. On Thursday, the BOJ held its policy rate at 0.75% as expected, though board member Hajime Takata dissented, recommending a 25 basis point hike to 1% for a second consecutive meeting amid rising inflation risks. BOJ Governor Kazuo Ueda also indicated that a rate increase remains possible if the economic slowdown from the Iran conflict proves temporary and core inflation persists. The yen further benefited from easing oil prices after US President Donald Trump ruled out deploying ground troops to the Middle East, and Israeli Prime Minister Benjamin Netanyahu pledged to refrain from additional strikes on Iranian energy infrastructure.

The Japanese yen weakened toward 160 per dollar on Thursday, hovering at its lowest level since July 2024 when authorities last stepped in to support the currency, as the Bank of Japan kept its policy rate unchanged in a widely expected move. However, BOJ board member Hajime Takata dissented to the decision, proposing a 25 basis point rate hike to 1% for the second meeting in a row, citing upside risks to inflation. Oil prices surged again following fresh attacks on energy infrastructure in the Middle East as the Iran war continues. The yen also faced pressure from a strong dollar after the US Federal Reserve signaled it will hold rates until inflation shows signs of easing again. Meanwhile, Prime Minister Sanae Takaichi is set to meet US President Donald Trump later today to discuss potential economic and military cooperation, navigating a delicate diplomatic balancing act after Trump initially urged Japan to deploy warships to the Strait of Hormuz before retracting the request.