The financial market on the morning of March 2, 2026 was shaken by US and Israeli military attacks on Iran, causing crude oil prices to rise to their highest level in months. This fluctuation immediately poured cold water on the recovery efforts of the Japanese currency.
According to data at 11:44 AM, the USD/JPY exchange rate pair (the Yen exchanged for 1 US dollar) increased to 156.53, corresponding to a 0.30% decrease in the Yen's value compared to the previous session.
The weakening of the Yen this time stems from its nature as a net energy importer. As energy costs rise due to concerns about supply disruptions in the Strait of Hormuz, the Yen and other Asian currencies face serious devaluation pressure.
Although the Yen is often considered a safe haven asset, in the current scenario of rising oil prices, safe-haven demand only helps partially limit the downward trend of the USD/JPY exchange rate instead of creating a strong reversal.
Amidst the "eye of the storm" of geopolitics, BOJ Deputy Governor Ryozo Himino spoke out, affirming the possibility of continuing to raise interest rates to gradually return monetary policy to a neutral state.
Mr. Himino noted that although core inflation has not reached the target of 2%, previous interest rate hikes (bringing interest rates from a negative range to 0.75%) have not caused any significant negative impact on the economy. However, inflation data in Tokyo in February falling below 2% is creating a difficult problem for the BOJ's policy tightening roadmap.
Currently, the Yen is in an extremely sensitive state. On the one hand, the USD/JPY exchange rate is under pressure from the upward momentum of oil prices and the strength of the greenback.
On the other hand, the prospect of normalizing monetary policy of the BOJ is the only support to prevent this currency from falling deeply to a 52-week low at 159.46. The consequence of this tug-of-war makes investors closely monitor all developments from the Gulf region, because any further escalation could cause the Yen to lose its advantage from potential future interest rate hikes.
