Japanese Yen softens on US-Iran tensions, intervention fears grow
- USD/JPY gathers strength near 159.00 in Monday’s early European session.
- Iran threatened to retaliate for the US seizure of the ship.
- BoJ’s Ueda avoided hints of an April rate hike; Japanese authorities are on high alert for FX intervention.
The USD/JPY pair trades in positive territory around 159.00 during the early European session on Monday. Renewed conflict between the United States (US) and Iran, and the closure of the Strait of Hormuz weigh on the Japanese Yen (JPY) against the US Dollar (USD).
US President Donald Trump said on Sunday that US Marines had taken custody of a vessel that tried to get past the American blockade on Iranian ports, per the Guardian. Iran’s Foreign Ministry spokesman Esmail Baghaei said the US blockade of Iran’s ports and coastline is an act of aggression that violates the ceasefire. Signs of ongoing US-Iran tensions continue to support the Greenback in the near term.
Bank of Japan (BoJ) Governor Kazuo Ueda on Friday avoided signaling an April rate hike, citing high economic uncertainty from the "negative supply shock" of the war. Markets now widely anticipate the Japanese central bank to hold rates steady until at least June 2026.
Nonetheless, the pair currently trades near a critical level, raising fears of intervention. Finance Minister Satsuki Katayama stated that Japan is watching markets with a "high sense of urgency" and is prepared to act against speculative moves.
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
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