Yen Slips Amid Weak Data

The Japanese yen strengthened to around 158.5 per dollar on Wednesday, marking its third consecutive session of gains as market optimism grew over a potential de-escalation of tensions in the Middle East. Investors were encouraged by President Donald Trump’s remarks that US forces could conclude operations in Iran within two to three weeks. Meanwhile, Iranian President Masoud Pezeshkian said Tehran was willing to end hostilities if guarantees were provided to prevent the conflict from reigniting. Domestically, Japan’s economic indicators underscored resilience despite the geopolitical uncertainty. The Bank of Japan’s sentiment index for large manufacturers rose to 17 in the first quarter of 2026, reaching its highest level since the fourth quarter of 2021, suggesting that business confidence remains robust. Meanwhile, the manufacturing PMI was revised slightly upward to 51.6 in March from a preliminary estimate of 51.4, though it remained below February’s near four-year peak of 53.

The Japanese yen stabilized around 159.6 per dollar on Tuesday, holding gains from the previous session, supported by repeated verbal warnings from Tokyo and growing market positioning for a possible intervention. On Monday, top currency official Atsushi Mimura said the government would take decisive action if needed, echoing earlier remarks from Finance Minister Satsuki Katayama. Their comments came as the yen weakened past the critical 160 per dollar level that had previously prompted Tokyo to intervene in currency markets in July 2024. The currency came under pressure from surging oil prices linked to the Middle East conflict given Japan’s reliance on oil imports from the region. Despite recent support, the yen is still on track to lose more than 2% this month as the dollar stood out among safe-haven currencies during this crisis.

The Japanese yen appreciated past 160 per dollar on Monday, reversing losses from earlier in the session as the country’s top currency chief stepped up verbal warnings to arrest the currency’s slide. Vice Finance Minister for International Affairs Atsushi Mimura told reporters that concern is growing over rising speculative activity, not only in the crude oil futures market but also in the foreign exchange market. He added that the government would take decisive action if necessary. His remarks came after the yen weakened past the critical 160 per dollar level that had previously prompted Tokyo to intervene in currency markets in July 2024. The yen came under pressure from surging oil prices linked to the Middle East conflict, as higher import costs threatened to derail Japan’s economic recovery. The Iran war showed no signs of easing, with Iran-backed Houthi militants in Yemen joining the hostilities and additional US troops arriving in the region.