Yen Holds Decline as BOJ Policy Outlook in Focus

The Japanese yen traded around 159.2 per dollar on Wednesday after declining for two consecutive sessions, as investors weighed the Bank of Japan’s policy outlook ahead of its meeting next week. Reports suggest the central bank is likely to keep interest rates unchanged this month while assessing the economic impact of the Middle East conflict, though it may signal a possible return to policy normalization as soon as June. The BOJ is also expected to lift inflation forecasts while lowering growth projections, reflecting higher energy costs and broader headwinds linked to the Iran war. On the data front, Japanese exports rose for a seventh straight month, supported by strong demand from China and ASEAN economies. The yen also faced additional pressure from a stronger US dollar after plans for a second round of US-Iran peace talks collapsed, though President Donald Trump extended the current ceasefire.

The Japanese yen slipped toward 159 per dollar on Tuesday, staying under pressure amid growing uncertainty over the Bank of Japan’s policy outlook. Reports indicate the central bank is likely to hold rates steady this month while evaluating the economic fallout from the Middle East conflict, though it could signal a resumption of policy normalization as early as June. The BOJ is also expected to raise inflation forecasts while trimming growth projections, reflecting elevated energy costs and broader headwinds from the Iran war. Meanwhile, markets remain focused on US-Iran peace negotiations, with both sides expected to send delegations to Islamabad for a second round of talks before the current ceasefire expires. Oil prices and the dollar eased, providing some relief to the yen given Japan’s heavy dependence on energy imports from the Middle East.

The Japanese yen depreciated toward 159 per dollar on Monday, giving back gains from the previous session as oil prices rallied following an escalation in US-Iran tensions over the weekend. President Donald Trump said the US Navy fired on and seized an Iranian-flagged cargo vessel in the Gulf of Oman after it ignored warnings to halt while departing Hormuz. Tehran also reversed plans to reopen the Strait of Hormuz after Washington refused to lift its blockade on Iranian ports and stated it would not take part in a second round of negotiations. Oil prices surged more than 5%, exerting downward pressure on currencies of oil-importing economies such as Japan. Meanwhile, markets remain split on whether the Bank of Japan will raise interest rates later this month, as Governor Kazuo Ueda has avoided pre-committing to an April hike. Still, the BOJ is widely expected to upgrade its inflation forecasts at this month’s meeting, reflecting elevated energy costs.