The Japanese yen rose in Asian markets on Friday against a basket of major and secondary currencies, moving away from an 18-month low against the US dollar, as bargain buying accelerated and after Japan’s finance minister hinted at the possibility of joint intervention with the United States to support the struggling currency.

According to Reuters, many officials at the Bank of Japan see scope for another interest rate hike, with some not ruling out an increase as early as April, as the yen’s weakness threatens to intensify rising inflationary pressures.

Despite the current rebound, the Japanese currency may record a third consecutive weekly loss, amid concerns linked to political developments in Japan, where Prime Minister Sanae Takaichi is likely to dissolve parliament and call an early general election in February.

Price Overview

• Japanese yen exchange rate today: The dollar fell against the yen by more than 0.4% to ¥157.97, from the opening level of ¥158.63, after recording a high of ¥158.70.

• The yen ended Thursday’s trading down 0.15% against the dollar, resuming losses that had paused the previous day during a recovery from an 18-month low of ¥159.45 per dollar.

Joint intervention to support the yen

Japan’s Finance Minister Satsuki Katayama said on Friday that the government “will not rule out any options” to address excessive and unjustified movements in the foreign exchange market, in a clear signal of the possibility of direct intervention to support the yen.

Katayama said the current weakness of the yen does not reflect Japan’s economic fundamentals and is hurting household purchasing power. She added that Japan remains in close contact with its international partners, especially the United States, to ensure that any action in currency markets is consistent with international understandings on exchange rate stability.

Speaking at her regular press conference, Katayama said that the joint statement signed with the United States last September “was extremely important” and included provisions related to foreign exchange intervention.

Felix Ryan, an FX strategist at ANZ, said that approaching the intervention stage is often accompanied by statements from Japan’s Ministry of Finance or government officials about yen levels, or by inquiries made to counterparties.

Ryan added that the significance of such remarks depends mainly on the dollar-yen level and the speed of its movements over a 24-hour period.

Japanese interest rates

• Four sources familiar with the matter told Reuters that some monetary policy officials at the Bank of Japan see the possibility of raising interest rates sooner than markets currently expect.

• These sources point to a potential rate hike decision at the April meeting, amid concerns that the continued decline of the yen could worsen rising inflationary pressures.

• The sources, who asked not to be identified because they are not authorized to speak to the media, said the Bank of Japan does not rule out early action if sufficient evidence emerges that the economy can achieve the 2% inflation target sustainably.

• Economists told Reuters that the Bank of Japan would most likely prefer to wait until July before raising the key interest rate again, with more than 75% expecting it to rise to 1% or more by September.

• Pricing for the probability of the Japanese central bank raising interest rates by a quarter percentage point at the January meeting remains steady below 10%.

• The Bank of Japan meets on January 22–23 to review economic developments and determine appropriate monetary tools for this sensitive phase facing the world’s fourth-largest economy.

Weekly performance

Over the course of this week’s trading, which officially ends with today’s settlement, the Japanese yen is down about 0.25% against the US dollar, on track for a third consecutive weekly loss.

Early elections

Hirofumi Yoshimura, leader of the Japan Innovation Party and a partner in the ruling coalition, said on Sunday that Takaichi may call early general elections.

Japan’s public broadcaster NHK reported on Monday that Prime Minister Sanae Takaichi is seriously considering dissolving the House of Representatives and calling an early general election in February.

Kyodo News said on Tuesday that Takaichi had informed ruling party leaders of her intention to dissolve parliament at the start of its regular session on January 23.

The Yomiuri Shimbun reported on Wednesday that Takaichi is considering holding an early lower house election on February 8.

The move to dissolve the current parliament comes as Takaichi seeks to strengthen her popular mandate and secure a comfortable parliamentary majority to ensure passage of the 2026 fiscal year budget and proposed economic reforms, particularly as the current government faces challenges in passing legislation in a divided parliament.

Views and analysis

• News of early elections has created political uncertainty among investors, immediately reflected in yen movements in currency markets, amid anticipation of how the elections could affect future Bank of Japan rate hike decisions.

• Eric Theoret, a currency strategist at Scotiabank in Toronto, said that early elections would give Takaichi an opportunity to capitalize on the strong popularity she has enjoyed since taking office last October.

• Theoret added that the implications for the yen are highly negative, as Takaichi is seen as an advocate of loose monetary and fiscal policy, and therefore comfortable with more flexible fiscal policy and larger deficits.

• Tony Sycamore, a market analyst at IG, said the looming elections are fueling yen weakness and weighing on Japanese government bonds due to “concerns about excessive fiscal expansion.”

• Sycamore added that the recent selling of the yen toward the key 160 level brings Japan’s Ministry of Finance noticeably closer to actual intervention.

Energy and resources experts agree that if the situation in Iran were to spiral out of control, it would have a massive impact on global oil markets and financial markets. This was not the case when Nicolás Maduro was ousted in Venezuela. The reason is simple: Iran produces roughly four times as much oil as Venezuela.

Andreas Goldthau, Director of the Willy Brandt School of Public Policy at the University of Erfurt, says:

“Iran is the third-largest producer in OPEC. Its output accounts for around 4% of global oil demand, while Venezuela produces only about 1%.”

The energy expert adds: “Iran is estimated to export around two million barrels per day, compared with no more than 350,000 barrels per day for Venezuela. Global markets would feel a much stronger impact if Iranian production were halted.”

In addition, fears of a regional conflict in the Gulf weigh heavily on the Iran outlook. Goldthau says: “Around half of the world’s oil reserves and a third of global oil production are located in the Middle East. As a result, political developments in Iran have a far greater impact on markets than events in Venezuela.”

OPEC statistics show that Venezuela’s estimated reserves of about 303 billion barrels are the largest in the world (one barrel equals 159 liters). However, these reserves consist largely of heavy crude that can only be extracted and refined using specialized technologies. A significant portion of this oil is also located in the remote Orinoco Belt.

Iran and Venezuela… international sanctions hinder the oil sector

Iran, like Venezuela, is subject to international sanctions on its oil sector. The country lacks access to the latest drilling and extraction technologies, while maintenance is costly due to shortages of spare parts and weak structural investment. In addition, the state controls the sector, making foreign investment more difficult, according to Goldthau. The same applies to refining operations.

He says: “Iranian refineries do not produce petroleum products of the quality expected by Western buyers. This, along with sanctions, is the result of Israeli and US attacks on Iran’s midstream sector.”

In the oil and gas industry, the midstream segment includes transportation, storage, and the initial processing of crude oil and natural gas after extraction. The US-based GPA Midstream association defines the role of companies in this segment as providing logistical efficiency and ensuring reliable delivery regardless of production fluctuations in countries such as Iran or Venezuela.

Remarkable resilience despite difficulties

Despite all these challenges, Goldthau describes Iran’s oil sector as having “shown a surprising degree of resilience,” at least in terms of output volumes, even though it has not returned to the six million barrels per day seen before the 1979 Islamic Revolution.

He says: “Production eventually recovered and stabilized at around four million barrels per day after falling to two million barrels per day in the 1980s. But the state treasury has been severely drained because Iran has for years been forced to sell its oil at steep discounts to secure buyers, preventing the investments the country desperately needed.”

Iran’s shadow fleet… a lifeline for oil smuggling

As with Russia, Iran’s covert fleet of oil tankers plays a central role in circumventing sanctions. Goldthau explains: “The Western sanctions regime has forced Iran to store part of its production. Tankers are increasingly being used to compensate for limited onshore storage capacity.”

These floating storage facilities are mostly located off Southeast Asia, close to major buyers, foremost among them China, which purchases more than 90% of Iran’s oil exports. Goldthau says: “Large volumes of Iranian oil are sitting offshore near Malaysia.” Tehran uses the National Iranian Tanker Company in these operations, which operates one of the largest tanker fleets in the world.

To evade sanctions, Iranian vessels operate in a manner similar to Russian ships, transferring sanctioned Iranian oil at sea to vessels that do not fly the Iranian flag, facilitating delivery to buyers.

Poverty instead of oil revenues

The social situation in Iran closely resembles that of Venezuela, where deteriorating oil infrastructure has worsened conditions, while energy subsidies consume the state budget and make it difficult for the government to provide affordable energy to the population.

The result is a fiscal crisis, a sharp currency depreciation, hyperinflation, and widespread protests.

One scenario in particular poses a serious threat to the ruling system in Tehran: if oil sector workers join the protest movement, it could signal the end of clerical rule. It remains unclear whether unrest has reached Khuzestan, Iran’s most important oil-producing region. Fortune magazine reported that it had seen no signs of a decline in oil exports.

Still, it is impossible to predict what might happen if oil workers respond to a strike call by Reza Pahlavi, the exiled son of Iran’s last shah. Oil strikes were the decisive factor in toppling the shah in 1978, when pressure escalated to the point that within months the monarchy collapsed and was replaced by Ayatollah Khomeini.

Could oil reach $120 a barrel?

If the Islamic Republic of Iran were to collapse, the regional balance of power would change dramatically. Mark Mobius, a pioneer in emerging market investing, warns: “The best outcome is a complete regime change. The worst is a prolonged internal conflict with the current regime remaining in place.”

If Iranian production were disrupted, oil prices would surge sharply in the short term. Over the longer term, however, other producers could fill the gap left by Iran. The International Energy Agency could also release strategic oil reserves to calm markets, according to Goldthau.

He cautions, however, that the greatest risk lies in the possibility of “dragging regional actors into the conflict.” If Iran were to close the Strait of Hormuz — a narrow waterway through which around 25% of global oil flows — oil prices could rise to as much as $120 a barrel, according to estimates by investment banks such as JPMorgan Chase.

Drilling platforms and oil refineries in neighboring countries could also come under attack, further affecting energy markets. Goldthau warns that with around 20% of global liquefied natural gas production also passing through the Strait of Hormuz, any such escalation could drive gas prices higher in Europe.

US stock indices rose during Thursday’s trading, supported by a rebound in semiconductor shares.

As corporate earnings continue to flow, several Wall Street banks reported their quarterly results today for the final quarter of 2025, including Goldman Sachs, Wells Fargo, and Bank of America.

In trading, the Dow Jones Industrial Average rose by 0.7%, or 375 points, to 49,525 points by 17:37 GMT. The broader S&P 500 climbed 0.6%, or 42 points, to 6,969 points, while the Nasdaq Composite advanced 0.8%, or 185 points, to 23,657 points.

Palladium prices fell during Thursday’s trading, amid a stronger dollar against most major currencies, in addition to profit-taking sales.

With strong demand for platinum group metals (PGMs) continuing, the global research division at Bank of America Securities raised its 2026 platinum price forecast to $2,450 per ounce from a previous estimate of $1,825, and also lifted its palladium forecast to $1,725 per ounce from $1,525.

Key takeaways from the bank’s weekly Global Metals Markets report dated January 9 showed that trade-related disruptions to PGM flows continue to keep markets tight, particularly the platinum market. The report also noted that China’s platinum imports are providing additional price support.

Although a supply response is likely, the bank expects it to be gradual, citing what it described as “production discipline and mine supply inelasticity.”

These forecasts come as platinum and palladium prices continue to rise this year, with spot prices reaching $2,446 per ounce for platinum and $1,826 per ounce for palladium.

As a result, both metals have exceeded the bank’s previous forecasts, prompting it to revise its price estimates upward.

In a statement to Mining Weekly, the bank said: “We continue to expect platinum to outperform palladium, supported by persistent market deficits.”

The bank explained that US tariffs have had a clear impact on several metals markets, and that the risk of additional tariffs continues to loom over PGMs.

This has been one of the factors behind rising inventories at the Chicago Mercantile Exchange, alongside a surge in exchange-for-physical (EFP) transactions.

Palladium EFP activity recorded stronger performance, driven largely by growing concerns that the United States could impose tariffs on Russian palladium, amid ongoing anti-dumping and countervailing duty investigations.

In this context, the bank said the US Department of Commerce had estimated the dumping margin for unwrought Russian palladium at around 828%.

The bank noted that imposing tariffs on as-yet undisclosed Russian volumes could push domestic prices higher, given that Russia is a major supplier of palladium.

Chinese import demand boosts price support

Outside the United States, China has provided additional support to prices. Early in 2025, a sharp recovery in jewelry sector activity attracted more ounces into the Chinese market. With gold prices at record highs, this development is particularly significant, as substituting just 1% of gold jewelry demand could increase the platinum deficit by around one million ounces, equivalent to nearly 10% of total supply.

In the second half of 2025, the launch of physically backed platinum and palladium futures contracts on the Guangzhou Futures Exchange (GFEX) provided further support to prices.

These contracts represent China’s first domestic hedging instruments for PGMs denominated in renminbi, and they allow for physical delivery of both bars and sponge metal. The bank said that the availability of physical liquidity was a key driver behind the price rally seen in December.

China’s palladium imports have also quadrupled since September compared with last year, which the bank described as difficult to explain fundamentally given the ongoing phase-out of internal combustion engines, suggesting the increase is largely linked to the launch of palladium futures contracts on the Guangzhou exchange.

Gradual supply response expected

With PGM prices now trading above marginal production costs and incentive prices for investment, markets are closely watching for a supply response.

The bank said: “We expect any response to be measured. Producer margins — particularly in South Africa and North America — have been under sustained pressure over the past two years, which may encourage caution in expanding output.”

As for new supply, increases are likely to emerge only gradually, given the long lead times required to move from development to stable production levels.

Many ongoing projects represent incremental expansions or phased increases in output, rather than sources of large and rapid supply growth.

On the supply side, production issues in South Africa tightened the platinum market in 2025. Mine output in the country fell by about 5% year on year between January and October 2025, mainly due to operational problems such as flooding and plant maintenance in the first quarter. The bank expects a modest recovery in South African platinum production this year, but not enough to eliminate the market deficit.

In Russia, the world’s largest palladium supplier, output also faced challenges as Norilsk Nickel transitioned to new mining equipment and experienced changes in ore composition. As a result, the company’s platinum output fell by 7% and palladium output by 6% year on year during the first nine months of 2025. As these temporary disruptions fade, Russian PGM production is expected to recover this year, potentially limiting the pace of palladium price gains.

While high prices can incentivize higher supply, the bank believes additional volumes are more likely to come from mine life extensions and project restarts, rather than rapid and large-scale capacity expansions.

In practice, most new supply requires several years to move from construction to full production, and many projects currently under development are incremental or phased expansions rather than immediate sources of large additional volumes.

The bank noted that two major new projects moving toward production — Ivanhoe Mines’ Platreef project and Wesizwe’s Bakubung project in South Africa — are expected to add a combined 150,000 ounces of platinum and 100,000 ounces of palladium during the current year.

Other expansion projects remain longer-dated and dependent on final investment decisions. Among them is Valterra Platinum’s Sandsloot underground project at the Mogalakwena mine, which is not expected to reach an investment decision before 2027, with underground ore extraction potentially starting after 2030.

Meanwhile, the dollar index rose by 0.2% to 99.3 points by 16:04 GMT, hitting a high of 99.4 and a low of 99.09.

In trading, March palladium futures fell by 3.3% at 16:05 GMT to $18415 per ounce.