Yen Weakness Stokes Intervention Fears

The Japanese yen held its recent decline to around 159.5 per dollar on Friday, close to the critical 160 level that previously prompted authorities to intervene in the currency markets back in 2024.. Finance Minister Satsuki Katayama said authorities are prepared to take “bold actions” to counter foreign exchange moves, as surging energy prices from the Middle East conflict weigh on Japan’s oil-importing economy and its currency. Katayama also indicated that the ministry is monitoring commodity markets after reportedly making inquiries with market participants earlier this week about possible intervention in crude oil futures. Meanwhile, investors continued to grapple with heightened uncertainties in the Middle East amid skepticism that the US and Iran could strike a deal to end the war in the near term.

The Japanese yen fell to around 159.5 per dollar on Thursday, marking a third consecutive session of losses as the dollar strengthened amid heightened uncertainty over diplomatic efforts to resolve the Middle East conflict. The US maintained that peace negotiations are ongoing, while Iran signaled it has no intention of holding direct talks with Washington. Tehran said it would reject a US ceasefire offer, instead countering with a five-point plan granting it control over the Strait of Hormuz. The yen also faced pressure from rebounding oil prices, which stoked inflation concerns and weighed on Japan’s growth outlook. Meanwhile, Japan received two oil tankers from the Middle East this week that bypassed the critical waterway, easing some supply pressures. A former Japanese national security adviser suggested the country consider deploying warships to help secure the waterway alongside other nations, protecting both its own vessels and those of international partners.

The Japanese yen steadied around 158.7 per dollar on Wednesday after a volatile start to the week, as oil prices retreated on hopes for a Middle East ceasefire, easing pressure on Japan’s import-dependent economy. The moves came amid reports that the US was pursuing diplomatic efforts to end the war with Iran, though investor skepticism persisted after Tehran denied engaging in any negotiations with Washington. The yen also drew support from concerns over potential intervention in currency markets, as Japanese officials signaled the government’s readiness to take all necessary steps to defend the currency. Reports further indicated that Japan’s Finance Ministry had reached out to market participants regarding possible intervention in crude oil futures markets, given their impact on the yen.