Yen Rises as BOJ Holds Policy Steady

The Japanese yen strengthened to around 159 per dollar on Tuesday, recouping recent losses after the Bank of Japan kept its policy rate unchanged at 0.75% for a fourth straight meeting, in line with expectations. The central bank also raised its inflation outlook while trimming its growth forecast for FY2026, citing the economic impact of the Middle East conflict, which is expected to weigh on corporate earnings and pressure household real incomes. BOJ Governor Kazuo Ueda remains under scrutiny to reinforce expectations of a gradual normalization path that could provide support for the yen, which has come under pressure from surging oil prices. Further currency weakness could heighten the likelihood of policy tightening if imported inflation accelerates through exchange-rate pass-through effects. Finance Minister Satsuki Katayama also reiterated that authorities stand ready to intervene in currency markets at any time.

The Japanese yen traded around 159.5 per dollar on Tuesday, moving sideways through the week as investors adopted a cautious stance ahead of the Bank of Japan’s upcoming policy decision. The central bank is broadly expected to keep its benchmark rate unchanged as policymakers weigh heightened inflation risks against weaker growth prospects linked to the Middle East conflict. However, market participants are increasingly speculating that BOJ Governor Kazuo Ueda may hint at a gradual return to policy normalization in the months ahead. Investors also continued to monitor developments in the Middle East after Iran submitted a new proposal to the US, though disagreements over Tehran’s nuclear program remain a key sticking point. Meanwhile, Finance Minister Satsuki Katayama reiterated that authorities remain prepared to intervene around the clock to support the yen, adding that Japan and the US will deepen coordination on currency-related issues going forward.

The Japanese yen held steady around 159.3 per dollar on Monday after weakening last week, as markets positioned for the upcoming Bank of Japan policy meeting, where interest rates are widely expected to remain unchanged. However, the central bank may lift its inflation outlook while lowering its growth forecast to reflect the economic impact of the ongoing Middle East conflict. Meanwhile, BOJ Governor Kazuo Ueda will face the challenge of signaling their determination to keep normalizing monetary policy to support the yen, which has come under pressure from surging oil prices due to the Iran war. Last week, Finance Minister Katayama said authorities retain a “free hand” to intervene in currency markets to stabilize the yen, stressing readiness to take “decisive” action against speculative moves.