Japanese Yen underperforms as Iran conflict prompts BoJ policy uncertainty
- The Japanese Yen has been under pressure as investors expect the BoJ’s prolonged hold on interest rates.
- Iran conflicts seem to have jeopardized BoJ rate hike plans.
- Investors shift focus to the US NFP data for February releasing in the North American session.
The Japanese Yen (JPY) trades lower against its major currency peers, with the USD/JPY pair rising to near 157.75, in the late Asian trade on Friday. The Japanese currency is under pressure as market participants expect the Bank of Japan (BoJ) to hold interest rates steady for a prolonged period amid conflicts in the Middle East involving the United States (US), Israel, and Iran.
Japanese Yen Price Today
The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies today. Japanese Yen was the weakest against the Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.10% | -0.07% | 0.08% | -0.08% | -0.35% | -0.14% | -0.07% | |
| EUR | 0.10% | 0.02% | 0.18% | 0.02% | -0.27% | -0.04% | 0.03% | |
| GBP | 0.07% | -0.02% | 0.17% | -0.02% | -0.29% | -0.06% | 0.00% | |
| JPY | -0.08% | -0.18% | -0.17% | -0.16% | -0.44% | -0.23% | -0.15% | |
| CAD | 0.08% | -0.02% | 0.02% | 0.16% | -0.28% | -0.07% | 0.02% | |
| AUD | 0.35% | 0.27% | 0.29% | 0.44% | 0.28% | 0.22% | 0.29% | |
| NZD | 0.14% | 0.04% | 0.06% | 0.23% | 0.07% | -0.22% | 0.07% | |
| CHF | 0.07% | -0.03% | -0.00% | 0.15% | -0.02% | -0.29% | -0.07% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Japanese Yen from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent JPY (base)/USD (quote).
On Wednesday, BoJ Governor Kazuo Ueda warned that rising oil prices due to the Iran conflict would worsen terms of trade for Japan and put “downward pressure on its economy and prompt the underlying inflation”. Ueda stressed supporting wage growth for achieving the sustainable BoJ’s price target.
The JPY struggles to attract bids even as Japan’s Finance Minister (FM) Satsuki Katayama has warned of intervention. On Wednesday, Katayama said that the administration is closely tracking FX movements with a “strong sense of urgency”.
Meanwhile, the USD/JPY pair trades higher despite the US Dollar (USD) trading with slight caution ahead of the release of the US Nonfarm Payrolls (NFP) data for February. As of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades marginally down to near 99.00.
The US NFP report is expected to show that the economy created 59K fresh jobs, significantly lower than 130K in January. The Unemployment Rate is seen steady at 4.3%.
Investors will closely monitor the US official employment data to get fresh cues on the Federal Reserve’s (Fed) monetary policy outlook.
Bank of Japan FAQs
The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.
The Bank of Japan embarked in an ultra-loose monetary policy in 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds. In March 2024, the BoJ lifted interest rates, effectively retreating from the ultra-loose monetary policy stance.
The Bank’s massive stimulus caused the Yen to depreciate against its main currency peers. This process exacerbated in 2022 and 2023 due to an increasing policy divergence between the Bank of Japan and other main central banks, which opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy led to a widening differential with other currencies, dragging down the value of the Yen. This trend partly reversed in 2024, when the BoJ decided to abandon its ultra-loose policy stance.
A weaker Yen and the spike in global energy prices led to an increase in Japanese inflation, which exceeded the BoJ’s 2% target. The prospect of rising salaries in the country – a key element fuelling inflation – also contributed to the move.
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