The USD/JPY is approaching the 160.00 mark on Friday — a significant psychological and politically sensitive level that has served as an intervention trigger for Japanese authorities several times in 2024. This threshold is once again under scrutiny, influenced by the same volatility factors that prompted earlier interventions. The pair has experienced a rally of about 770 pips since early March lows around 152.10, achieving an approximate gain of 5% in less than three weeks — marking one of the most pronounced and sustained movements in USD/JPY during the current cycle. The pair is currently positioned at 159.67-159.85, marking an extension of gains over four consecutive sessions. The daily chart shows that the 50-day and 200-day EMAs are positioned significantly below the current price, reinforcing the ongoing uptrend. The Stochastic RSI has pulled back from overbought levels but continues to show positive momentum — the cooling trend suggests a temporary consolidation phase ahead of the next significant movement, rather than an actual reversal. The 160.40 level signifies a resistance barrier from 1990 — surpassing this point would eliminate the structural ceiling that has characterized the pair for 35 years and has the potential to propel USD/JPY significantly higher. The 158.00-158.50 range serves as the closest support level, while 157.50 acts as a more significant structural reference, coinciding with the point where the 50-day EMA starts to bolster the upward trend. The USD/JPY is currently influenced by two opposing forces that hold similar philosophical significance, yet exhibit markedly different levels of intensity at this moment. The yen’s established role as a safe haven is expected to draw capital inflows amid the Iran war — as global risk appetite diminishes, investors have typically turned to the yen, along with the dollar and Swiss franc. The observed dynamic is evident in USD/CHF, with the Swiss franc demonstrating notable strength.
However, Japan’s status as a safe haven is being significantly compromised by the oil price shock, impacting the nation in a distinctly severe manner. About 95% of Japan’s crude oil imports are sourced from the Middle East. Brent crude recorded an average of $97 per barrel in March, reflecting a significant increase of 33% compared to February. The closure of the Strait of Hormuz impacts more than just Japan’s oil import expenses; it fundamentally jeopardizes Japan’s energy security in a manner that is not experienced by most other developed economies. When oil surges 33% in a month for a country that imports 95% of its crude from the affected region, the resulting current account deterioration, inflation import shock, and fiscal pressure all translate directly into yen selling pressure. The yen’s safe-haven appeal is being undermined by the energy import crisis triggered by the same geopolitical event. The dollar is gaining strength as it capitalizes on dual advantages: heightened safe-haven demand and increasing expectations for rate hikes driven by oil-related inflation. Japanese Finance Minister Satsuki Katayama issued a clear warning on Friday regarding the need for “bold actions” to address currency fluctuations if USD/JPY nears 160.00 — the exact level being tested in Friday’s session. This is not standard diplomatic phrasing. In 2024, Japan engaged in physical interventions in the currency markets on several occasions, particularly around the 160 mark. The Ministry of Finance is currently evaluating additional unconventional instruments: According to a report, Tokyo is considering intervening in oil futures markets to halt the decline of the yen — a strategy that has rarely been employed by a government in a developed market. The consideration by the MoF to engage in oil futures intervention, as opposed to merely relying on conventional FX spot intervention, indicates the extent to which Japanese authorities have been compelled to move beyond their standard strategies in response to the current circumstances.
The primary factor contributing to the weakness of the yen is not merely the strength of the dollar or differences in interest rates; rather, it is the oil price shock that is currently undermining Japan’s trade balance. Engaging in currency markets while the fundamental driver is a $97 average Brent price resembles attempting to remove water from a sinking vessel without fixing the breach in the hull. Former BoJ Governor Haruhiko Kuroda emphasized the pressure from a different perspective, stating in an Asahi newspaper interview that the BoJ “would raise the policy rate in April if you think about it normally” — further noting that the Iran war offers additional justification to expedite monetary policy normalization instead of postponing it. The Bank of Japan maintained its interest rates at 0.75% during the meeting on March 19. April has become the central point for the upcoming decision. A Bloomberg survey indicates that 37% of economists anticipate a rate hike in April, a notable increase from the 17% recorded two months prior. The distinct market pricing elevates the probability to an impressive 64%. On Thursday, Japanese two-year government bond yields reached their highest point since 1996, marking the peak prior to the Asian financial crisis. This surge reflects bond markets anticipating a near-term rate increase ahead of the Bank of Japan meeting on April 30. The reasoning is clear: Japan is bringing in severe inflation via oil imports. Brent averaging $97 in March for a nation reliant on Hormuz-dependent Middle East routes for 95% of its oil indicates that inflation is not merely a concern for the future — it is a present-day reality. The Bank of Japan’s longstanding hesitance to adjust interest rates has stemmed from the persistent deflationary pressures faced by the country.
The prevailing structural deflationary bias is currently being overshadowed by an energy import shock, which is systematically driving consumer prices upward. Former Governor Kuroda’s assertion that the Iran war “only provides further reasons to accelerate monetary policy normalization” represents the clearest recognition from a senior former BoJ official that the hawkish argument has gained significant traction since the onset of the conflict. A confirmed April BoJ hike would serve as the most substantial catalyst for yen support — however, a shift to 0.75% to 1.00% indicates only a 25 basis point adjustment compared to the 3.50-3.75% Fed funds rate. The differential contracts marginally yet continues to be substantial. The interest rate differential between the United States and Japan — the primary mechanical driver of USD/JPY over any sustained period — remains around 275-300 basis points and shows no significant signs of narrowing. The Federal Reserve maintained the federal funds rate at 3.50-3.75% during its meeting on March 18. The Fed’s revised dot plot continues to indicate only a single rate cut for this year. Chair Powell clearly indicated that inflation is not decreasing as rapidly as anticipated, with core PCE adjusted upward to 2.7% for 2026. The one-year inflation expectations from the University of Michigan surged to 3.8% on Friday, marking an increase of 0.4 percentage points since February. The likelihood of a Fed rate increase by the end of the year has surpassed 52% — indicating that markets are now considering a hike as the more probable outcome compared to a cut. If the Fed and the BoJ both increase rates at the same time — influenced by oil inflation — the overall differential sees minimal change, indicating that the core factor supporting USD/JPY strength continues to hold steady. The 10-year Treasury yield stands at 4.44%, while Japanese 2-year yields are at 30-year highs near 1.32%. This significant spread continues to drive carry trade flows in a consistent direction: selling yen and buying dollars.
The critical threshold that indicates whether USD/JPY is experiencing a continuation rally or nearing a structural breakout is 160.40. This level signifies the 1990 resistance threshold — the previous occasion USD/JPY maintained trading above 160 for an extended duration was amid the Japanese asset bubble period. Breaking and closing above 160.40 on a daily basis would remove this long-standing supply zone and pave the way to levels not observed since the late 1980s — potentially aiming for 162-165 in the medium term. The challenge lies within the range of 160.00 to 160.40: this 40-pip area is where verbal intervention from the Ministry of Finance transitions into tangible action. Japan’s earlier interventions in 2024 occurred at levels of 160 and above, involving substantial amounts in dollar selling, totaling tens of billions of dollars. An intervention at current levels would represent the most extensive foreign exchange operation Japan has undertaken since 2022. Nonetheless, actions taken to address structural rate differentials of 275+ basis points have historically offered only temporary relief, lasting days or weeks, before the prevailing trend reemerges. The 2024 scenario — a pronounced yen surge due to intervention, succeeded by a steady recovery of USD/JPY — serves as the most historically comparable framework for anticipating future developments. The pair experienced a significant decline from 160 to 152 in early 2026 prior to the onset of the current rally. The established precedent indicates that intervention may yield temporary results; however, it does not alter the prevailing directional bias given the significant rate differential.
GBP/JPY is nearing 213 — a threshold that serves the same purpose as USD/JPY’s 160, acting as a critical dividing line for both bullish and bearish positions. The pair has experienced a rally in alignment with USD/JPY as the overarching trend of yen weakness unfolds across all currency pairs. The 213 level has consistently served as a ceiling for rallies, leading to short-term pullbacks. Bulls have two strategies: they can either wait for a retracement to the confirmed swing low support to buy the dip, or they can wait for a confirmed close above 213 resistance to enter the breakout. Market participants may consider a bearish stance if the price moves below 213, ensuring to manage risk with a stop placed above the recent swing high. The technical configuration mirrors that of USD/JPY: a bullish medium-term framework, with a near-term risk of consolidation or pullback at a significant resistance level, leading to a binary outcome based on the resistance’s ability to hold or break. The domestic challenges facing GBP — with Retail Sales at -0.4% MoM and the BoE caught in the inflation-versus-growth conundrum — indicate that the appreciation of GBP/JPY is largely driven by yen weakness rather than any significant strength in sterling. The potential for GBP/JPY, contingent upon USD/JPY surpassing 160.40, would aim for a range of 215-216 in the medium term.