The correlation between the yen and oil prices has reached a new high in 2021, prompting Japan to intervene in the market.

On the day before the Japanese authorities intervened in the foreign exchange market, the correlation between the US dollar and the Japanese yen and Brent crude oil rose to the highest level since the end of 2021, highlighting a further tightening relationship between oil prices and the yen. The large interest rate differential between the US and Japan has long been seen as a core factor in the weakening of the yen, and the recent tensions in the Middle East pushing up oil prices are seen as another important driver. Japan, as a major energy importing country, is extremely vulnerable to fluctuations in oil prices, as changes in oil prices directly impact the country's trade balance and exchange rate trends. Japanese officials have also begun to crack down on speculative trading in the crude oil futures market, calling it a new variable driving exchange rate volatility. Hiroyuki Mimura, Japan's top foreign exchange official, said on Friday that regulators are ready to intervene in the crude oil futures market at any time. Brent Donnelly, president of Light Spectra Markets, said that after the yen strengthened, oil prices fell on Thursday, possibly because traders held related positions in both markets. He said, "Traders betting on higher oil prices often also short the yen; once their short yen positions suffer significant losses, traders will sell off their crude oil futures positions and exit the market."