Euro Edges Higher vs Yen as Tsunami Alert and Oil Shock Hit

Key Moments

EUR/JPY trades near 187.00 in European dealings after recouping prior-session losses.
A magnitude 7.5 earthquake off Japan’s Sanriku Coast triggers a tsunami warning and nuclear safety checks.
Renewed Strait of Hormuz blockade and elevated energy costs weigh on the Yen and revive Eurozone stagflation worries.

EUR/JPY Supported as Yen Faces Energy-Linked Pressure

EUR/JPY is holding on to gains around the 187.00 area in Monday’s European session, recovering after modest declines in the previous trading day. The cross is being underpinned as the Japanese Yen (JPY) struggles in the face of climbing oil prices, amid renewed tensions between the United States (US) and Iran that underscore Japan’s reliance on crude supplies from the Middle East.

Seismic Risk in Japan: Tsunami Alert and Nuclear Plant Assessment

The Japan Meteorological Agency issued an immediate tsunami warning for the Hokkaido, Iwate, and Aomori prefectures after a magnitude 7.5 earthquake struck the Tohoku region at 4:53 p.m. Monday. Authorities forecast waves of up to three meters, with the epicenter located off the Sanriku Coast. In response, Tohoku Electric Power reported that it is evaluating the impact of both the earthquake and the tsunami on its Onagawa nuclear power plant.

Geopolitics and Energy: Strait of Hormuz Blockade Back in Focus

Iranian state broadcaster Islamic Republic News Agency (IRNA) reported that Tehran has declined to restart talks with US officials, citing “unrealistic expectations,” among other issues. According to the report, Iran has closed the Strait of Hormuz once again, reversing a short-lived reopening after Trump refused to lift port blockades.

The renewed disruption to the Strait of Hormuz is undermining hopes for a sustained normalization of oil flows from major Middle Eastern exporters. This is amplifying concerns about stagflationary pressures in the Eurozone, as the prospect of persistently higher energy costs weighs on the growth outlook while supporting inflation.

Policy Outlook: BoJ, ECB and Currency Dynamics

Market participants remain split over the likelihood that the Bank of Japan (BoJ) will raise interest rates later this month. Governor Kazuo Ueda has avoided providing a clear indication of a possible April move, leaving investors without explicit guidance on the near-term rate path. Even so, the BoJ is still anticipated to upgrade its inflation projections at the upcoming meeting, in line with the backdrop of elevated energy prices.

For the Euro (EUR), expectations that the European Central Bank (ECB) could lift rates this year may offer support against other major currencies. ECB President Christine Lagarde stated last week that higher energy prices are pushing the Eurozone economy away from its baseline growth scenario, while not explicitly pointing to any imminent tightening steps.

Factor	Impact on EUR/JPY
Rising oil prices and Middle East supply risk	Weigh on JPY due to Japan’s reliance on imported energy, supporting EUR/JPY
BoJ policy uncertainty	Mixed signals on near-term rate action keep JPY direction less clear
ECB rate expectations	Prospects of a hike this year underpin EUR against peers, including JPY
Japan earthquake and tsunami alert	Introduces additional domestic risk considerations for Japan

Japanese Yen: Structural Drivers in Focus

The Japanese Yen (JPY) is among the most heavily traded currencies globally. Its valuation is shaped broadly by Japan’s economic performance, but more directly by Bank of Japan policy decisions, the yield spread between Japanese and US government bonds, and overall market risk sentiment, among other influences.

One of the BoJ’s core mandates is currency management, so its policy choices are especially important for the Yen. The central bank has occasionally stepped directly into foreign exchange markets, typically with the aim of pushing the Yen lower, although such interventions are infrequent due to political sensitivities with key trading partners. The BoJ’s ultra-loose stance from 2013 to 2024 contributed to Yen weakness against major peers, as policy diverged from other leading central banks. The more recent, gradual rollback of this accommodative framework has helped provide some marginal support to the currency.

The gap between Japanese and US bond yields is another central driver. For much of the past decade, the BoJ’s commitment to ultra-loose conditions promoted a widening spread between 10-year US and Japanese government bond yields, generally favoring the US Dollar over the Yen. The BoJ’s 2024 decision to begin unwinding this policy, together with rate cuts at other large central banks, is narrowing that yield gap.

Risk appetite across global markets also matters. The Yen is frequently regarded as a safe-haven asset, so periods of financial stress often see investors shift capital into JPY, reflecting its perceived stability and reliability. As a result, episodes of heightened turbulence tend to support Yen strength relative to currencies seen as more speculative.