Japanese Yen softens on fragile US‑Iran ceasefire, eyes on US CPI release

USD/JPY gains ground to near 159.15 in Friday’s Asian session.
The fragility of the US-Iran ceasefire underpins the US Dollar against the Japanese Yen.
Markets expect the BOJ to hike its rate to 1.0% at the upcoming meeting on April 28.

Lallalit Srijandorn FXStreet

The USD/JPY pair gathers strength to around 159.15 during the Asian trading hours on Friday. Ongoing concerns regarding the Strait of Hormuz and the Middle East continue to lift the US Dollar (USD) against the Japanese Yen (JPY). Traders will keep an eye on the US March Consumer Price Index (CPI) inflation report, which is due later on Friday.

US President Donald Trump said late Tuesday that he had agreed "to suspend the bombing and attack of Iran for a period of two weeks” on the condition that Iran re-opens the Strait of Hormuz. Earlier Friday, Trump accused Iran of doing a "very poor job" of handling oil through the key waterway.

He added that he expects Iran to comply with terms he says were agreed on for a ceasefire ahead of planned negotiations this weekend, warning that if it doesn't, he'll order large-scale attacks on the country. US Vice President JD Vance and senior envoys Steve Witkoff and Jared Kushner are set to meet for talks in Pakistan on Saturday on a potential long-term deal with Iran.

Japanese Prime Minister Sanae Takaichi said that the government is weighing a plan to release approximately 20 days' worth of additional oil reserves starting from early May onwards. This move aims to stabilize domestic energy supplies amid persistent shipping disruptions in the Strait of Hormuz.

Markets anticipate a potential Bank of Japan (BoJ) rate hike at the upcoming April policy meeting, which could support the JPY and act as a headwind for the pair. Tomohisa Fujiki of Citi Research indicated that there is up to a 70% probability of this monetary policy adjustment.

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.

Author

Lallalit Srijandorn

FXStreet

Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.

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