Yen Underperforms as Trade Concerns Intensify

During Thursday's European trading session, the yen weakened broadly against its major currency counterparts, with USD/JPY trading near 158.54. Market reports indicate that persistently high energy prices continue to inflate Japan's import costs, widening the trade deficit and serving as a core factor dragging the yen's performance relative to other currencies.

**Trade Deficit and Energy Costs Weigh**

As a major resource importer, Japan's external dependence on energy is extremely high. Sustained elevated energy prices have directly deteriorated its terms of trade, forcing importers to sell more yen to acquire dollars for settling bills, creating persistent yen selling pressure in the foreign exchange market. This structural factor has left the yen lagging among major currencies, failing to gain effective support even against the backdrop of overall dollar consolidation.

**Policy Outlook Divergence Caps Rebound**

The yen's weakness is also constrained by divergence in US-Japan monetary policy prospects. According to TradingKey, personnel changes in Japan's political and central bank spheres have heightened policy uncertainty. Prime Minister Takaichi Sanae has nominated two academics inclined toward "reflation" to the central bank's monetary policy committee, reinforcing market expectations that the Bank of Japan will remain cautious on its rate hike path. Meanwhile, hawkish remarks from Federal Reserve officials have limited bets on narrowing US-Japan interest rate differentials, leaving the yen without a catalyst for strength.

**Intervention Risk and Market Dynamics**

The yen's depreciation has drawn policy-level attention. As previously reported by The New York Times, the US Treasury took rare action to help support the yen, highlighting the cross-border contagion risks that sharp yen fluctuations could trigger. Japan holds over $1.1 trillion in US Treasury securities; a large-scale sell-off to intervene in the currency market could push up US borrowing costs. This potential policy coordination risk adds uncertainty to further upside in USD/JPY, but actual intervention effects have been limited so far, with the market still testing the tolerance threshold of Japanese authorities.