Yen Firms on Intervention Watch

The Japanese yen strengthened to around 158.8 per dollar on Thursday, reversing earlier losses as Finance Minister Satsuki Katayama said she held close discussions on foreign exchange policy with US Treasury Secretary Scott Bessent, adding that authorities remain prepared to act decisively if necessary. On the monetary policy side, the IMF said the Bank of Japan could look through inflation driven by the Iran conflict, arguing that its impact on underlying price pressures is likely to remain limited and should not disrupt the central bank’s gradual tightening trajectory. The yen also drew support from softer oil prices and a weaker US dollar as optimism grew about a potential deal to end the Middle East conflict. Reports suggested Washington and Tehran are considering extending their two-week ceasefire to allow more time for negotiations, even as the Strait of Hormuz remains effectively closed under a dual blockade.

The Japanese yen traded around 158.9 per dollar on Wednesday after strengthening in the previous session, supported by lower oil prices and a softer US dollar amid hopes for a diplomatic resolution to the Middle East conflict. The US and Iran are reportedly preparing for a second round of peace talks before the current two-week ceasefire expires, even as tensions in the Strait of Hormuz continue to heighten global energy risks. Japan’s currency remains sensitive to the supply shock stemming from the Iran conflict, given the country’s heavy reliance on Middle East oil imports. Meanwhile, the Bank of Japan is reportedly considering lifting its inflation forecast at this month’s policy meeting to reflect higher energy costs, though it is still expected to keep rates unchanged. BOJ Governor Kazuo Ueda said earlier this week that policymakers must stay alert to the economic impact of the Middle East conflict, warning that higher oil prices could weigh on Japan’s growth outlook.

The Japanese yen strengthened toward 159 per dollar on Tuesday, ending a three-day losing streak as both the dollar and oil prices retreated on rising expectations that a US-Iran agreement could eventually be reached. President Donald Trump said Tehran had reached out to Washington just hours after the US imposed a naval blockade on Iranian oil shipments in the Strait of Hormuz. Iranian President Masoud Pezeshkian also stated that Iran is prepared to continue peace talks, provided they remain within the framework of international law. The yen additionally drew support from intervention concerns as it neared the key 160 per dollar threshold, a level that previously triggered Japanese authorities to step in to stabilize the currency. Meanwhile, Bank of Japan Governor Kazuo Ueda emphasized on Monday the need to remain alert to the economic fallout from the Iran conflict, warning that higher oil prices could weigh on Japan’s growth outlook.