{"id":31372,"date":"2026-03-23T23:58:40","date_gmt":"2026-03-23T23:58:40","guid":{"rendered":"https:\/\/www.vtmarketsglobal.com\/en\/uncategorized\/31372\/"},"modified":"2026-03-23T23:58:40","modified_gmt":"2026-03-23T23:58:40","slug":"mufg-expects-middle-east-turmoil-energy-shocks-and-flows-to-weaken-the-yen-further-lifting-usd-jpy","status":"publish","type":"post","link":"https:\/\/www.vtmarketsglobal.com\/en\/live-updates\/31372\/","title":{"rendered":"MUFG expects Middle East turmoil, energy shocks and flows to weaken the yen further, lifting USD\/JPY"},"content":{"rendered":"MUFG links recent yen weakness to worsening fundamentals if the Middle East crisis continues. It points to a terms-of-trade hit from higher energy prices, rising global yields, and more unhedged foreign equity buying by Japanese households.\n\nSince Friday 13 March, Finance Minister Katayama has commented on foreign exchange five times. Last Monday, he said yen moves did not reflect fundamentals and the Ministry of Finance would \u201cfully respond\u201d to excessive moves.\n\n

Yen Moves And Policy Signals<\/h3>\nThe yen rose last Thursday after the Bank of Japan policy announcement and Governor Ueda\u2019s press conference. Most of that move reversed on Friday, alongside signs that short yen positions were reduced on Thursday.\n\nMUFG notes markets price only a 50% chance of one Fed rate cut. It also states the ECB and the BoE are priced for three to four 25bp rate rises, while the RBA has delivered two and markets expect three more.\n\nIt adds that yields are moving away from Japan and hedging costs are rising. MUFG says USD\/JPY could break resistance and retest the 2024 high near 161.95 if energy prices rise further.\n\nLooking back at the analysis from this time last year, the fundamental reasons for yen weakness were clear. The combination of an energy shock hurting Japan\u2019s trade balance and diverging global interest rates created a perfect storm. We saw how this thinking was correct as intervention threats from officials in March 2025 only provided temporary relief.\n\n

Key Risks And Trade Positioning<\/h3>\nThose underlying pressures from 2025 have not disappeared; in fact, the interest rate gap has widened. With the Federal Reserve holding its key rate at 4.75% and the Bank of Japan’s rate still just 0.15%, the incentive to borrow yen to buy dollars remains immense. This differential is a core driver, with USD\/JPY now trading around 168.20, well above the levels discussed last year.\n\nThe energy situation mentioned has stabilized somewhat, with WTI crude oil prices averaging around $92 per barrel in the first quarter of 2026, down from the crisis peaks. However, the damage to Japan’s import-heavy economy persists in the form of a sustained trade deficit. This structural outflow of yen continues to act as a headwind for the currency.\n\nFurthermore, the trend of Japanese households buying foreign assets has accelerated, adding to the yen’s weakness. Data for January 2026 showed a record \u00a52.1 trillion in retail purchases of foreign equities, much of it unhedged. This flow shows a domestic lack of confidence in the yen’s purchasing power.\n\nGiven this backdrop, traders should consider strategies that benefit from further yen depreciation. Buying out-of-the-money call options on USD\/JPY for the second quarter of 2026 could be a cost-effective way to position for a move towards the 170 level. This approach limits downside risk while offering substantial upside if the current trend continues.\n\nHowever, we must remain vigilant for intervention, especially as the pair approaches psychologically important levels. We saw how the Ministry of Finance acted decisively in August 2025 near 164.50, causing a sharp but temporary reversal. Any derivative positions should therefore be structured to withstand sudden bouts of volatility caused by official action.\n\nCreate your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b>\n

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Start trading now – Click here<\/a> to create your real VT Markets account <\/strong> <\/p>\r\n","protected":false},"excerpt":{"rendered":"

MUFG warns yen weakness may persist as Middle East tensions lift energy costs, yields, and unhedged outflows.<\/p>\n","protected":false},"author":38,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[46],"tags":[],"class_list":["post-31372","post","type-post","status-publish","format-standard","hentry","category-live-updates"],"acf":[],"aioseo_notices":[],"featured_image_src":null,"featured_image_src_square":null,"author_info":{"display_name":"josephine","author_link":"https:\/\/www.vtmarketsglobal.com\/en\/author\/josephine\/"},"_links":{"self":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/posts\/31372","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/users\/38"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/comments?post=31372"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/posts\/31372\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/media?parent=31372"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/categories?post=31372"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/tags?post=31372"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}