Japanese Yen stays defensive despite the Middle East war escalation
Oleh Dhwani Mehta
Tanggal Diterbitkan: 22 Mar 2026 | Tanggal Dimodifikasi: 22 Mar 2026
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The Japanese Yen (JPY) is underperforming against the US Dollar (USD) in the early Asian trades on Monday, despite the Middle East conflict extending into a fourth week, with no signs of de-escalation in sight.
- The Japanese Yen is losing ground at the weekly open on Monday.
- The US Dollar finds renewed haven demand as the Middle East conflict deepens.
- The focus is on the war, with Trump’s threats and Iran’s revenge response.
The Japanese Yen (JPY) is underperforming against the US Dollar (USD) in the early Asian trades on Monday, despite the Middle East conflict extending into a fourth week, with no signs of de-escalation in sight.
The war escalated over the weekend, with US President Donald Trump granting Iran a 48-hour ultimatum to reopen the Strait of Hormuz to shipping or face the destruction of its energy infrastructure.
Iran’s Islamic Revolutionary Guard Corps (IRGC) in response said that Iran will completely shut the strait if Trump proceeds with his threats.
Meanwhile, the Jerusalem Post reported that the US is considering a ground operation to seize Iran’s Kharg Island, a key oil hub.
These threats continue to hit risk sentiment and bolster safe-haven flows, with investors preferring to hold the US Dollar (USD) – the world’s reserve currency instead of the traditional safety bets such as the Japanese Yen (JPY) and Gold.
However, the further upside in the USD/JPY pair appears capped due to fears of forex market intervention by the Japanese authorities close to the 160.00 level.
Additionally, the Bank of Japan’s (BoJ) hawkish interest rate outlook limits the decline in the Japanese Yen, checking the pair’s advance.
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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