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

As tensions in the Middle East intensify, the yen’s depreciation is accelerating. Due to concerns that rising crude oil prices will lead to an expansion of Japan’s trade deficit, the phenomenon of “buying yen when trouble is brewing” has disappeared. The market is focused on the kind of “yen depreciation typical of 2022,” triggered by Russia’s invasion of Ukraine. Increasingly, opinions suggest that buying the U.S. dollar during extraordinary times and rising energy prices will accelerate the sell-off of the yen.

“Under the circumstances where concerns about oil prices rising due to the Strait of Hormuz being blocked are causing worry, there is no atmosphere of actively buying the yen,” explained a foreign exchange broker at a domestic Japanese bank about the market sentiment since early this week.

On March 3, in the London foreign exchange market, the yen temporarily depreciated against the U.S. dollar to the 157.90 yen per dollar range, the lowest level since February 9. It closed the weekend around 156 yen. Against the Swiss franc, the yen depreciated over two days to a low of about 203 yen per Swiss franc, the lowest since then; against the Australian dollar, it also fell over three days to a new low since 1990.

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The Japanese Economic News Agency and the Financial Times merged in November 2015 into the same media group. An alliance formed by Japan’s and Britain’s two newspapers—both founded in the 19th century—is advancing cooperation across broad areas such as joint special reports under the banner of “high-quality, the strongest economic journalism.” As part of this effort, articles are now exchanged between the two newspapers’ Chinese websites.