2026.03.26 2026.03.26
Yen Slides Amid Rising Oil Pressures. Forecast as of 26.03.2026

Dmitri Demidenkohttps://www.litefinance.org/blog/authors/dmitri-demidenko/

The Japanese government doubts that intervening in the Forex market will drive the USD/JPY pair down. The US dollar is strong amid surging Brent crude prices. Let’s discuss this and develop a trading plan.

Major Takeaways

• The Japanese government is stepping up its verbal interventions.
• Japan is planning to intervene in the oil market.
• The BoJ may raise rates as early as April.
• Long positions on the USD/JPY pair can be opened on a breakout of 159.7.

Weekly Fundamental Forecast for Yen

While the Japanese government says it is ready to intervene in the currency market at any moment, it is also considering a large-scale plan to deploy its $1.4 trillion in reserves across other markets. The crude oil futures market, in particular, is in the spotlight. The recent rally in Brent crude—triggered by the closure of the Strait of Hormuz—has become a major concern for Prime Minister Sanae Takaichi.

Japan has considerable experience with currency interventions, but its effectiveness has often depended on periods of US dollar weakness. With the Fed signaling the end of its monetary tightening cycle and a potential shift toward rate cuts, pressure on USD/JPY has increased. It seems that Tokyo has been waiting for the right moment to act.

USD/JPY Rate and Currency Interventions

Source: Bloomberg.

This time, however, the Fed is largely sidelined. The futures market gives a 63% probability that the US regulator will keep rates unchanged through the end of 2026. At the same time, the trajectory of the US dollar is increasingly tied to oil prices. In other words, any decline in USD/JPY quotes is likely to be temporary as long as Brent crude prices remain elevated. Addressing the root cause of the problem would, in turn, ease pressure on the Japanese currency.

At the same time, Japanese officials continue to fuel concerns in the domestic currency market. Finance Minister Satsuki Katayama has described the USD/JPY rally as disconnected from fundamentals and warned that intervention in the foreign exchange market could occur at any moment. She has been echoed by Deputy Minister for International Affairs Atsushi Mimura. Alongside this, Bank of Japan Governor Kazuo Ueda has indicated that the Middle East conflict will have only a temporary impact on the economy and reiterated that the central bank is still considering further rate hikes. These factors would support the yen.

However, the currency remains weak. This weakness, combined with rising import costs driven by higher oil prices, is increasing the risk of renewed inflationary pressure, even as inflation has recently fallen below the 2% target for the first time since March 2022.

Japan CPI

Source: Bloomberg.

In this context, the Bank of Japan’s potential moves are truly mind-boggling. The central bank refrained from raising the overnight rate even though consumer prices remained above target for four years. Now, it is considering rate hikes while the CPI slides below 2%. It is nothing short of a paradox.

In reality, central bank actions are typically preventive. If rising inflation expectations are not contained early, they can spiral out of control. This is precisely why Nomura expects the BoJ to increase the overnight rate in April.

Weekly USDJPY Trading Plan

Interventions in the oil market are unlikely to achieve lasting results. Brent is reacting primarily to news of ongoing negotiations, and any funds Japan injects will likely only suppress prices temporarily. The same logic applies to the USD/JPY pair. As a result, a sustained break above the resistance level at 159.7 could serve as a strong signal to add to previously established long positions.

This forecast is based on the analysis of fundamental factors, including official statements from financial institutions and regulators, various geopolitical and economic developments, and statistical data. Historical market data are also considered.

Price chart of USDJPY in real time mode