Even with the dollar’s recent slump, the yen is unable to get off the floor too as Japan continues to suffer heavily from the Middle East conflict.
Even with the dollar’s recent slump, the yen is unable to get off the floor too as Japan continues to suffer heavily from the Middle East conflict. The closure of the Strait of Hormuz is hitting Asian countries hard and Japan is one to be impacted quite badly in all of this.
That has already seen the country push for a release of emergency oil reserves, with a second round likely to follow next month. The fact that Japan relies so heavily on oil imports is a major dampener for the economy, not least with surging energy prices. That will feed into more pain for households and businesses as import cost inflation jumps.
And that is another negative factor for the yen currency, amid everything else that has gone wrong before the war i.e. the Takaichi trade. As such, JP Morgan continues to hold a more bearish view on the currency in the medium-term. The firm notes that: “We think that higher energy prices amid heightened Middle East tensions would increase the downside pressure on JPY through various channels.