USD/JPY Tests 160.00 Level as Hormuz Closure and Debt Woys Weigh on Yen

Amid escalating geopolitical tensions threatening global energy supply chains, the Japanese Yen is facing severe pressure that has driven the USD/JPY pair to recover over 400 pips from its May lows, nearing the 160.00 psychological barrier. This decline comes as the Strait of Hormuz remains in de facto closure, causing stacking damage to the Japanese economy which relies heavily on energy imports. Furthermore, the Japanese government's plan to issue a fresh round of debt for an extra budget is further eroding investor confidence in the Yen's stability.

These movements coincide with selling pressure on major Japanese corporates, as markets weigh the impact of rising energy costs on profit margins for firms like Toyota (7203.T) and SoftBank Group (9984.T). Per market data, the continued closure of vital waterways could push crude prices to levels that threaten Japan's trade balance, which showed a fragile surplus of 301.9 billion Yen in April according to Ministry of Finance data (released May 20, 2026). This situation mirrors pressures seen during previous energy crises, increasing the likelihood of central bank intervention.

Traders are currently monitoring the stiff resistance at 160.00, with USD/JPY holding at elevated levels as of the close on May 26, 2026. Looking ahead at the economic calendar, market participants are focused on the upcoming Japanese Manufacturing and Services PMI data, alongside the FOMC Minutes which could dictate the Dollar's trajectory. A sustained break above 160.00 may force Japanese authorities to conduct direct foreign exchange intervention to curb the currency's rapid depreciation.