Foreign Exchange Intervention: Do Not Tolerate Speculators Exploiting Middle East Situation

Editorial

14:00 JST, May 2, 2026

The government and the Bank of Japan have intervened in the foreign exchange market by buying yen and selling dollars to curb excessive depreciation. It is crucial to take a resolute stance against speculative moves that exploit the turmoil in the Middle East.

On Thursday, the yen fell to the upper ¥160 range against the dollar in the foreign exchange market, declining to its weakest level in about one year and nine months. But that night, the yen had soared to the mid ¥155 range.

It appears they carried out “covert intervention,” not immediately announcing whether intervention had taken place, to create a sense of tension in the market. This marks the first time since July 2024 that a yen-buying, dollar-selling foreign exchange intervention was carried out.

Since the United States launched attacks on Iran on Feb. 28, the Japanese economy has continued to be plagued by mounting pressure for a weaker yen.

The Strait of Hormuz, a vital shipping artery for energy resources, has been effectively blocked, causing crude oil prices to soar.

Japanese companies are forced to sell yen and buy dollars to pay for imports. Also, the widening trade deficit fuels yen selling further.

High oil prices lead to price increases not only for fuel and transportation but also for a wide range of products, including food, daily necessities and chemical products, as well as services.

Excessive depreciation of the yen could accelerate the rise in import prices. Speculative moves that exploit such vulnerabilities in Japan should not be tolerated.

During the Golden Week holiday season, the number of market participants decreases, making exchange rates prone to significant fluctuations and leaving them vulnerable to speculative players. It appears that the government and the central bank took these factors into account when they carried out the foreign exchange intervention.

On Friday, Vice Finance Minister for International Affairs Atsushi Mimura said, “We recognize that the long holiday period is still in its early stages,” hinting at further intervention. The government and the BOJ are urged to remain vigilant on market movements.

The period of yen weakness that began in the spring of 2022 has been prolonged, but many members of the business community call for the yen’s level to be around ¥120 to ¥130 per dollar.

The government and the central bank have maintained that they do not carry out foreign exchange intervention with the aim of reaching a specific level. But in practice, ¥160 is likely viewed as the line on which to fight.

However, the scale of trading in the foreign exchange market is vast, and intervention merely buys time. The Japanese government must exert every diplomatic effort to bring about an early end to the fighting in the Middle East.

The persistent pressure for a weaker yen is also driven by the significant interest rate differential between Japan and the United States. It is crucial for the BOJ to keep an eye on exchange rates while carrying out monetary policy management.

The fact that the administration of Prime Minister Sanae Takaichi has not clearly outlined a path to fiscal soundness while advocating “responsible and proactive public finance” is also contributing to yen-selling. Efforts to gain public confidence in fiscal management should also not be neglected.

(From The Yomiuri Shimbun, May 2, 2026)