The Japanese Yen faces extended weakness in the coming months as geopolitical tensions in Iran continue disrupting global energy markets, according to Commerzbank analyst Volkmar Baur. The ongoing closure of the Strait of Hormuz is keeping oil prices elevated, which directly damages Japan’s trade balance given its heavy reliance on energy imports. This external shock is delaying any potential recovery for the Yen despite other fundamental factors that might otherwise support the currency.
Japan imports nearly all of its oil and natural gas, making it particularly vulnerable to supply disruptions through the strategic Hormuz shipping lane. Higher energy costs widen the country’s trade deficit as import bills surge while export revenues remain relatively stable. The deteriorating trade position puts downward pressure on the Yen as foreign currency outflows increase to pay for expensive energy purchases.
FXnCO Insight
Traders should maintain bearish Yen positions or hedge Japanese exposure until Hormuz tensions ease, as sustained energy price elevation will continue pressuring JPY through trade balance deterioration.
Source: FXStreet