The Japanese Yen (JPY) continued to weaken against the US Dollar (USD), with the USD/JPY pair extending its winning streak for the fourth consecutive session and trading around 159.40 during early European hours on Friday [1]. This move comes as the US Dollar remains firm ahead of the release of the Personal Consumption Expenditures Price Index (PCE), the Federal Reserve's preferred inflation gauge, and as markets anticipate the Fed will keep interest rates unchanged at next week's policy meeting, with the current federal funds rate at 3.50%–3.75% [1].
Japanese authorities have signaled readiness to intervene in currency markets if necessary. Finance Minister Satsuki Katayama stated that all necessary measures would be taken as oil prices surge, while Bank of Japan Governor Kazuo Ueda warned that a weaker Yen could intensify imported inflation, potentially forcing the central bank to accelerate policy normalization. Ueda emphasized that exchange rates now play a larger role in influencing inflation than in the past [1].
DBS Group Research strategist Chang Wei Liang noted that USD/JPY is approaching the key 160 level that previously prompted intervention, but Japanese officials have remained largely silent. Liang suggested that Japan's strong dependence on Middle East oil and its sizeable strategic reserves could allow authorities to tolerate the pair near 160 for now, with only limited further Yen weakness expected [1][2]. According to Liang, Japan has a comfortable 250 days' worth of strategic oil reserves and has announced plans to release 15 days' worth of private-sector oil reserves and one month's worth of state reserves [2]. However, Source 1 reports Japan plans to release about 80 million barrels of oil from its strategic reserves—roughly 45 days of supply—beginning March 16 in coordination with the G7 and IEA, highlighting a discrepancy in the reported reserve release figures [1].
The ongoing Middle East crisis, specifically the closure of the Strait of Hormuz by Iranian forces, has disrupted tanker traffic and raised concerns about energy supplies. Japan relies on the Middle East for around 95% of its oil imports, with nearly 90% of shipments passing through the Strait [1]. Brent oil prices have surged above $100 per barrel, and WTI has surpassed $90, reflecting heightened market anxiety [3]. The risk-averse environment has driven haven demand for the US Dollar, causing the EUR/USD pair to break below 1.1500, trading at levels last seen in November 2025 [3].
Japanese Trade Minister Ryosei Akazawa stated that discussions are ongoing regarding Japan's allocation and timing within the IEA-led coordinated oil reserve release, and Japanese companies are exploring alternative crude supply sources, including the United States, Central Asia, and South America [1].
Forward-looking statements from officials and analysts suggest that while the Yen may face limited further weakness, authorities are prepared to act if volatility increases, and energy market developments remain a key risk factor [1][2].
CONCLUSION
The Japanese Yen remains under pressure as the USD/JPY approaches the critical 160 level, with Japanese authorities signaling readiness to intervene if necessary. The ongoing Middle East crisis and surging oil prices have heightened market uncertainty, driving haven demand for the US Dollar and impacting global currency and energy markets. While Japan's strategic reserves provide some buffer, the situation remains fluid and closely watched by policymakers and investors.