2026.03.31 2026.03.31
Sliding Yen Nears Intervention Zone. Forecast as of 31.03.2026

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

Japan is ready to combat speculators in the foreign exchange and oil markets. Tokyo’s persistent verbal interventions are curbing bullish sentiment in the USD/JPY pair. Let’s discuss this topic and make a trading plan.

Major Takeaways

• Japan’s verbal interventions remain ongoing.
• USD/JPY quotes are declining in line with falling US Treasury yields.
• Capital repatriation flows are likely to support the yen.
• Long positions on the USD/JPY can be opened on pullbacks with targets of 159 and 158.5.

Weekly Fundamental Forecast for Yen

Japanese officials are keeping speculators under pressure. Having built up net short positions on the yen to two-month highs, hedge funds are reluctant to buy the USD/JPY pair above the psychologically important 160 level amid the government’s ongoing verbal interventions and the BoJ’s focus on the national currency’s exchange rate.

USD/JPY Rate and Speculative Positions on Japanese Yen

Source: Bloomberg.

Finance Minister Satsuki Katayama claims that the time has come for decisive action. Vice Finance Minister for International Affairs Atsushi Mimura has promised to act on all fronts, including both the foreign exchange and oil markets. According to him, immediate decisive action may be required.

Kazuo Ueda has likewise expressed concern about the yen’s weakness. The BoJ governor believes that exchange rate fluctuations are affecting prices, as companies increasingly pass higher costs on to consumers. The BoJ must ensure that rising inflation expectations do not lead to an uncontrollable acceleration in core inflation.

However, consumer prices in Japan continue to slow, with Tokyo CPI—a leading indicator for nationwide inflation—sliding to 1.7%, its lowest level since April 2024.

Tokyo CPI

Source: Bloomberg.

Nevertheless, officials are concerned about the situation in the Middle East. About 90% of Japan’s energy imports come from that region. At the same time, rising oil prices and a weak yen heighten the risk of stagflation—an economic slowdown accompanied by galloping inflation. Such a mix creates serious challenges for the BoJ. The central bank must choose the lesser of two evils, while its passive stance may trigger renewed buying pressure on the USD/JPY pair.

Government rhetoric is not the only factor tempering USD/JPY bulls. Investors are increasingly reassessing the outlook for the US economy. In their view, the longer the conflict in Iran persists, and the higher Brent crude prices climb, the greater the risk of a recession. Against this backdrop, Treasury yields are declining, while USD/JPY bears are receiving support.

Moreover, according to Eurizon Capital, the decline in global stock indices will prompt Japanese investors to repatriate capital to Japan. It will give the yen a boost. The Japanese currency cannot yet serve as a safe haven due to its sensitivity to rising energy prices. However, the flow of capital could turn everything upside down.

Weekly USDJPY Trading Plan

Capital is not guaranteed to flow back to Japan, as investors have alternative destinations such as gold or Bitcoin. Against this backdrop, the ongoing conflict in the Middle East may still present opportunities to buy the USD/JPY pair on pullbacks to support levels of 159 and 158.5. Alternatively, long positions could be considered on a confirmed break above the 160 level.

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