The Japanese yen firmed to around 158.5 per dollar on Wednesday, advancing for a third straight session amid expectations that the Bank of Japan may strike a more hawkish tone at its policy meeting this week. A weaker yen combined with higher oil prices driven by the Iran war has heightened inflation risks, prompting speculation about a shift in guidance.
Even so, the central bank is widely expected to leave interest rates unchanged while it evaluates how the conflict in the Middle East is affecting Japan’s economy.
On the diplomatic front, Prime Minister Sanae Takaichi is due to meet US President Donald Trump this week, managing a sensitive balancing act after Trump initially pressed Japan to dispatch warships to the Strait of Hormuz, then later withdrew the request. Japan’s heavy dependence on Middle Eastern oil and its reliance on US security guarantees leave Tokyo in a particularly delicate position.
In economic data, Japanese exports climbed 4.2% year-on-year in February, beating market forecasts of 1.6% but decelerating sharply from the 16.8% surge recorded in January.
