The Japanese Yen (JPY) remained under pressure on Monday, even as the US Dollar (USD) weakened and oil prices fell following renewed optimism for a potential US-Iran deal that could reopen the Strait of Hormuz and ease tensions in the Middle East. At the time of writing, USD/JPY was trading around 158.90, consolidating within its recent one-week range after opening the week with a bearish gap. This movement came as the US Dollar Index (DXY) retreated toward the 99.00 mark and West Texas Intermediate (WTI) crude oil slipped to its lowest level since May 7, driven by reports of progress toward a temporary framework agreement between Washington and Tehran, which may include a 60-day ceasefire extension and the removal of the US naval blockade to Iranian ports [1].
Despite these developments, the Japanese Yen struggled to gain traction due to energy prices that remain well above pre-conflict levels, continuing to pressure Japan’s import-dependent economy. The article notes that even if a deal is reached and the Strait of Hormuz fully reopens, restoring shipping flows and normalizing supply chains could take time, leaving the Yen vulnerable to elevated energy costs in the near term [1].
In response to these challenges, Japanese Prime Minister Sanae Takaichi announced on Monday that the government will introduce support measures to curb household electricity and gas bills from July through September. An extra budget worth more than ¥3 trillion will be compiled, with around ¥500 billion specifically allocated for electricity and gas subsidies [1].
Market participants remain cautious about the risk of intervention by Japanese authorities near the 160.00 level in USD/JPY, recalling sharp Yen-buying moves in late April when the pair briefly climbed above that threshold. However, the broader upside bias in USD/JPY is supported by the wide interest rate differential between the Federal Reserve (Fed) and the Bank of Japan (BoJ). Oil-driven inflation concerns have reinforced expectations that the Fed could keep interest rates higher for longer, while the BoJ is expected to maintain a gradual pace of policy normalization [1].
According to the latest data, the Japanese Yen was the strongest against the US Dollar among major currencies today [1].
CONCLUSION
Despite a weaker US Dollar and lower oil prices, the Japanese Yen remains under pressure due to persistent elevated energy costs and ongoing interest rate differentials. Government support measures and market caution around intervention have limited USD/JPY volatility, but the Yen’s outlook remains vulnerable in the near term. The market impact is medium, with traders closely watching developments in the Middle East and Japanese policy responses.