Japan’s suspected 6 trillion yen intervention faces geopolitical risks from Iran conflict, undermining currency stabilization efforts.
Japan is suspected to have spent up to 6 trillion yen ($38 billion) to prop up the yen, marking one of its largest interventions. The move pushed dollar-yen from near 160 to below 157, matching the scale of operations in April 2024 and October 2022.
Analysts warn the effort may be the least effective yet, as escalating tensions with Iran introduce unpredictable geopolitical risks. Previous interventions relied on clearer Fed policy signals and domestic rate hikes, but current conditions leave authorities vulnerable to sudden reversals.
Sustainable yen strength hinges on Bank of Japan rate hikes and a de-escalation in the Strait of Hormuz. MUFG forecasts two rate increases this year but cautions that optimism over U.S.-Iran peace talks could fade quickly, complicating Japan’s currency defense.