Why hasn't the Japanese yen been bought amid the tense situation in the Middle East?

With tensions in the Middle East intensifying, the yen’s depreciation is accelerating. Fearing that higher crude oil prices would widen Japan’s trade balance deficit, the once-seen phenomenon of “buying yen when trouble arises” is no longer in place. Market attention is focused on the “yen depreciation like 2022” scenario triggered by Russia’s invasion of Ukraine. More and more views hold that in these extraordinary times, buying the U.S. dollar and the rise in energy prices will speed up the selling of the yen.

“In a climate where there is no appetite to buy yen despite concerns that oil prices are rising due to the Strait of Hormuz being blocked,” explained a foreign-exchange broker at a domestic Japanese bank regarding the mood in the FX market since early this week.

On March 3, in the London foreign exchange market, the yen briefly slid to the range of 157.90 yen per U.S. dollar, hitting the lowest level since February 9. It closed last weekend around 156 yen. Against the Swiss franc, the yen fell for two days to roughly the 203 yen-per-1-Swiss-franc range, the lowest level as well; against the Australian dollar, it also dropped for three days to a new low since 1990.

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Nikkei Inc. and the Financial Times merged into the same media group in November 2015. The alliance between the two newspapers—both founded in the 19th century, one in Japan and one in the UK—is moving forward with cooperation across a wide range of areas such as joint special reports under the banner of “high-quality, the strongest business journalism.” This time, as part of that effort, the two newspapers have exchanged articles between their Chinese websites.