The Japanese yen falls against most currencies due to escalating tensions in the Middle East, with oil prices rising following Iranian attacks on tankers in the Strait of Hormuz. The Bank of Japan keeps rates at 1% in its July meeting.
The Japanese yen has become one of the weakest currencies in the forex market this Monday, weighed down by rising oil prices and geopolitical uncertainty in the Middle East. The Japanese currency is trading around 162.35 yen per dollar in the European session, with slight gains against the greenback but widespread declines against the euro, pound, and Australian dollar.
The trigger for this movement is the intensification of Iranian attacks in the Strait of Hormuz, a key passage for nearly 20% of the world's energy supply. The Islamic Revolutionary Guard Corps (IRGC) has confirmed the explosion of two tankers attempting to transit through the southern route of the strait, as reported by The Guardian.
Oil Prices Rise, Asian Currencies Under Pressure
The increase in crude oil prices hits economies like Japan particularly hard, which are highly dependent on energy imports. The yen, considered a safe haven asset in times of tension, fails to benefit this time because the energy supply shock directly harms its trade balance.
The IRGC has warned that the passage will not be safe for "a single drop of oil and gas" while U.S. actions in the region continue. Shipping companies have drastically reduced their transits through Hormuz, driving up logistical costs and marine insurance.
For Spanish investors, the situation implies a potential rise in imported inflation if oil continues to climb, although the euro has remained relatively stable against the yen. Those with exposure to Japanese assets or travelling to Japan will see a relative increase in their purchases.
Bank of Japan: Rates Unchanged in July
On the monetary front, the Bank of Japan (BoJ) is expected to keep interest rates at 1% in its July meeting, according to sources cited by Kyoto. The central bank will indicate that the path of monetary policy remains upward and is likely to raise its growth forecast for the year.
This decision contrasts with the expectation that the Federal Reserve (Fed) will not cut rates in its meeting this month, which supports the dollar. The yen, caught between a cautious BoJ and high oil prices, could remain under pressure in the coming weeks.
"The yen is being punished by the combination of high oil and low rates. As long as the BoJ does not raise rates, any external shock weakens it," say currency analysts.
For Spanish exporters, a weak yen makes imports from Japan cheaper (cars, electronics), but raises the cost of exports to that country. Japanese tourism to Spain could also suffer if the purchasing power of Japanese travellers decreases.
The next key date will be the BoJ meeting at the end of July. If the central bank surprises with a rate hike, the yen could recover; if it maintains its stance, the currency will continue to depend on the evolution of oil prices and the conflict in Hormuz.
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