Yen Strengthens as BOJ Policy Shifts

Japan’s Economic Revitalization Minister Ryosei Akazawa said on Sunday, April 12, that Bank of Japan (BOJ) monetary policy could be used to support a stronger yen, a move he linked to easing inflation pressures tied to the Iran war. Speaking in Tokyo, Akazawa framed the yen as a potential tool for limiting price increases that can follow higher import costs.

His remarks came after an economist said on a television program that a firmer currency could help Japan absorb rising crude oil import costs. The economist suggested that a 10% to 15% appreciation in the yen could offset the impact of higher energy prices and help restrain broader inflation, including food prices. Akazawa said considering such an option is possible.

Akazawa also pointed to the BOJ’s current policy backdrop, noting that the central bank’s 2% inflation target is nearing achievement and that real interest rates remain low. Those conditions, as described by the minister, set the context for why monetary policy is being discussed as a channel that could influence the currency and, by extension, imported inflation.

Market pricing is already focused on the BOJ’s next steps. Financial markets currently assign about a 60% probability to the BOJ raising interest rates on April 28 . The prospect of a rate move is being watched closely because it can affect the yen’s value and the cost of imports, including energy, which can feed into consumer prices.

Separately, BOJ Deputy Governor Ryozo Himino has highlighted the central bank’s attention to the economic fallout from the Middle East war and the risk of stagflation. His earlier comments underscored that policymakers are monitoring how conflict-related shocks could weigh on growth while pushing prices higher, a combination that can complicate decisions on interest rates and broader monetary settings.

For global investors, the discussion matters because Japan’s policy signals can influence currency markets and cross-border capital flows. Akazawa’s comments add to the set of official statements being parsed for clues on whether the BOJ could adjust policy in a way that supports the yen amid inflation concerns linked to geopolitical conflict.

Key uncertainties remain. Akazawa described the option as something that could be considered, but he did not announce any policy change, and the BOJ’s decision-making timeline was not detailed beyond the market focus on April 28. How policymakers weigh inflation progress against growth risks tied to the Middle East war remains a central question for markets.