Japanese Yen softens after Trump Iran war remarks

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The USD/JPY pair gains momentum to near 159.20 during the Asian trading hours on Thursday. The US Dollar (USD) strengthens against the Japanese Yen (JPY) following US President Donald Trump’s speech from the White House.

USD/JPY edges higher to around 159.20 in Thursday's Asian session.
Trump said his core "objectives are nearing completion" in Iran.
Japan’s Mimura said authorities may take a 'decisive' step if speculative moves persist.

Trump said on Thursday that the US is "systemically dismantling the regime's ability to threaten America or project power outside of their borders.” He added that Iran's ability to launch missiles and drones has been curtailed.

A White House official stated that the US President will focus on the operation having met or exceeded all of its benchmarks, including destroying Iran’s ballistic missiles and production facilities. Uncertainty surrounding the US-Iran ceasefire and persistent tensions in the Middle East continue to boost the Greenback in the near term.

Fears that Japanese authorities would step in to support the domestic currency could help limit the JPY’s losses. Japan's top currency diplomat, Atsushi Mimura, said on Monday that officials may need to take "decisive" steps if speculative moves persist in the currency market.

"We are hearing that speculative moves are increasing in the currency market, in addition to the crude futures market. If this situation continues, it may be time to take decisive measures," said Mimura.

Japanese Yen FAQs

What key factors drive the Japanese Yen?

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.

How do the decisions of the Bank of Japan impact the Japanese Yen?

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.

How does the differential between Japanese and US bond yields impact the Japanese 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.

How does broader risk sentiment impact the Japanese Yen?

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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