Japanese Yen fights for control amid US-Iran war-led intense flight to safety
By Dhwani Mehta
Date Published: 2 Mar 2026 | Date Modified: 2 Mar 2026
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The Japanese Yen (JPY) is trying hard to regain control against the US Dollar (USD) in a fight to emerge as the traditional safety bet as the war between the United States (US), Israel and Iran enters its third day.
- Japanese Yen is looking to regain control as risk-aversion grips global markets, fuelling haven demand.
- USD/JPY struggles above 156.00, drawing some support from US Dollar buying.
- The pair looks to critical US-Iran geopolitical updates and US ISM PMI data.
The Japanese Yen (JPY) is trying hard to regain control against the US Dollar (USD) in a fight to emerge as the traditional safety bet as the war between the United States (US), Israel and Iran enters its third day.
The USD/JPY pair is holding modest gains, divided between broad USD strength and increased safe-haven flows into the JPY, as markets run for cover in times of escalating Middle East conflict.
The US launched a "massive" and ongoing attack against Iran's leadership and military in coordination with Israel, killing Iran's Supreme Leader Ayatollah Ali Khamenei and calling for strong retaliation from Tehran.
Markets remain worried if this war translates into a full-blown Middle East regional conflict, which could send Oil prices through the roof, spiking up inflation and driving the global economy into a tailspin.
Meanwhile, the Japanese Yen also continues to draw support from hawkish interest rate expectations from the Bank of Japan (BoJ), while the US Federal Reserve (Fed) remains on track to lower rates in the coming months, rendering negative for the Greenback.
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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