Investment Insights - If oil prices remain high, the yen exchange rate may further depreciate.
On March 12, the USD/JPY rose to 159.23, approaching a year-to-date high.
In terms of news, Iran attacked two oil tankers in Iraqi waters, and Iraqi officials stated that oil ports have completely ceased operations. Concerns about energy supply disruptions have intensified again, with Brent crude oil returning above $100 per barrel.
Japan imports about 90% of its crude oil from the Middle East, and soaring oil prices and supply disruptions will have a severe impact on the Japanese economy.
<img src="https://imageproxy.pbkrs.com/https://resource.mistorebox.com/insights/cms_uploads/uedimg/20260312/17732849235209.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://resource.mistorebox.com/insights/cms_uploads/uedimg/20260312/17732849235209.png"/>
【Source: TradingView; USD/JPY trend over the past six months】
Japan Takes the Lead in Releasing Oil Reserves
On March 11, the International Energy Agency (IEA) announced that 32 member countries agreed to release 400 million barrels of strategic oil reserves. However, before the IEA announced the agreement, Japan had already clearly stated its intention to release oil reserves.
&#34;Due to Iran's effective blockade of the Strait of Hormuz, Japan's crude oil imports are expected to significantly decrease after late this month,&#34; said Japanese Prime Minister Sanae Takaichi. &#34;Without waiting for the formal decision on the release of international oil reserves, Japan has decided to take action first, with the earliest release of oil reserves on March 16.&#34;
However, JP Morgan predicts that the coordinated actual release rate of the G7 can only reach a maximum of 1.2 million barrels per day. By the end of March, the cumulative crude oil deficit caused by geopolitical conflicts will exceed 100 million barrels. A mere 1.2 million barrels per day is like a drop in the bucket.
With no hope of a rate hike from the Bank of Japan in March, what will be the future trend of the yen?
&#34;The current economic and market environment will prompt the Bank of Japan to temporarily refrain from raising interest rates, as officials need to assess the severe impact that the Iran conflict may bring,&#34; said Yuichi Kodama, chief economist at Meiji Yasuda Research Institute. &#34;The surge in oil prices combined with a weak yen will severely drag down the Japanese economy. There is no doubt that the risk of stagflation is rising.&#34;
Vincent Chung, a portfolio manager at T. Rowe Price, believes that the Bank of Japan will maintain interest rates in March, but may take monetary policy action in April when salary negotiation data becomes available.
Chung pointed out that the market may also be concerned about potential foreign exchange intervention, but the recent depreciation of the yen is consistent with other foreign exchange peers. If the Bank of Japan sends a dovish signal at the March meeting, it may put further pressure on the yen exchange rate
Moody's economist Stefan Angrick stated that if oil prices remain above $100 per barrel, inflation in Japan may accelerate again, and the yen may face new depreciation pressure

The Japanese yen exchange rate has depreciated below 159, and oil prices have surpassed 100 USD, intensifying market concerns over energy supply disruptions. Japanese Prime Minister Fumio Kishida announced that Japan will take the lead in releasing oil reserves to address the reduction in crude oil imports. JP Morgan predicts that the oil release from the G7 will be limited and may not alleviate the supply crisis. The Bank of Japan may not raise interest rates in the current economic environment, with rising stagflation risks. Investors are focused on future monetary policy actions

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The Japanese yen exchange rate has depreciated beyond 159! Oil prices have surged again, breaking through 100 USD, and Takashi Sawa has taken urgent action