SMBC Nikko Securities strategist Makoto Noji warned Tuesday that Japan could be approaching the edge of a historic yen collapse, pointing to the potential for a prolonged oil price surge and government fiscal loosening as dual threats to the currency.
Noji said cost-push inflation over the past three years has severely burdened the Japanese public, and that stimulating demand at this juncture would only accelerate inflation. He called for growing sentiment around additional yen-buying intervention, alongside what he described as self-help measures — specifically interest-rate hikes and measures to seal off fiscal expansion — to prevent further inflation and currency weakening.
Finance Minister Satsuki Katayama responded to the yen’s trajectory by saying the government would take appropriate action in the currency market if necessary. Katayama’s statement stopped short of outlining specific intervention measures, but signaled that officials are monitoring the situation closely.
The dollar was trading at 159.67 yen, according to LSEG data, as Asian currencies consolidated against the U.S. currency. The yen’s weakness has been driven in part by the potential for sustained high oil prices, which increase Japan’s import bill as a resource-poor economy.
Beyond Japan, MUFG Bank senior currency analyst Michael Wan forecast that the dollar is likely to weaken toward the 1,400 won level over the next 12 months, calling the Korean won one of the bank’s top foreign-exchange picks. Wan cited cheap valuations for the won, a more hawkish Bank of Korea, South Korea’s strong exports, and an expected improvement in the country’s current-account surplus as factors that would offset South Korean residents’ capital outflows over time. The dollar was little changed at 1,513.80 won, LSEG data showed.
The broader Asian currency landscape was shaped by developments in the Middle East, where President Trump sought to quell a growing conflict between Israel and Hezbollah that threatened to derail U.S. peace talks with Iran. Commonwealth Bank of Australia senior economist and currency strategist Kristina Clifton said in a research report that a U.S.-Iran agreement to reopen the Strait of Hormuz would weigh on the dollar as a safe-haven currency. OCBC Group Research strategists maintained a neutral stance toward the dollar, noting that downside should be limited by U.S. economic outperformance even if an Iran deal lowers oil prices.
Singapore’s dollar was little changed at 1.2784 against the U.S. currency, LSEG data showed.