Japanese Yen Pressured by Iran War

The Japanese yen traded around 159.5 per dollar on Monday, near its weakest levels since July 2024, as the intensifying Iran conflict and rising energy costs continued to weigh on the currency. On Sunday, President Donald Trump threatened strikes on Iran’s power plants and other civilian infrastructure starting Tuesday if the Strait of Hormuz is not reopened, though Tehran rejected the ultimatum and kept the waterway effectively closed. Market expectations point to more than a 70% chance of a Bank of Japan rate hike this month, with over two additional increases expected by year-end. The IMF also recommended on Friday that the BOJ continue gradually raising rates toward a neutral level to curb underlying inflation. Separately, traders are closely monitoring for potential currency intervention from Tokyo after recent strong warnings from officials.

The Japanese yen edged near the 160-per-dollar mark on Friday, weighed down by growing uncertainties over the Bank of Japan's policy outlook. The BOJ has signaled a possible rate hike this month but faces questions over whether it will provide clear guidance ahead of the April 28 meeting. Under Governor Kazuo Ueda, the bank has rarely held policy steady when markets were expecting a move. Traders are pricing in roughly a 70% chance of a rate increase, meaning a hold could unsettle global markets already jittery over Middle East tensions. Adding to the pressure, Finance Minister Satsuki Katayama flagged rising speculative activity in currency and crude oil markets, linking the volatility to US President Donald Trump’s renewed threats against Iranian infrastructure. She warned that the government is ready to take bold measures if market disruptions persist. Despite recent declines, the Japanese yen remains on track for a weekly gain.

The Japanese yen slipped to around 159.2 per dollar on Thursday, as mixed signals from US President Donald Trump over the potential de-escalation of the Middle East conflict supported the greenback. The US dollar gained after Trump said the war in Iran was “very close” to completion and likely to meet its objectives in the coming weeks, while warning that military operations could intensify. However, he also emphasized that diplomatic talks are ongoing, leaving investors cautious about geopolitical risks and their impact on global markets. Japan, a major importer of Middle Eastern oil, has been hit sharply, as gasoline prices reached record highs in mid-March before easing slightly with government subsidies. Meanwhile, new Bank of Japan board member Toichiro Asada signaled a cautious, data-driven approach at his first briefing. Asada joins the nine-member board ahead of the April 27–28 policy meeting, where markets currently see about a 71% chance of a rate hike.