USD/JPY remains stable above 160.00, prompting heightened vigilance among traders regarding possible intervention from Japanese authorities. Japan’s Q1 GDP increased by 0.5% quarter-on-quarter, surpassing forecasts and showing an acceleration from Q4, marking its most robust growth since early 2025. Iran’s launch of multiple missile waves at northern Israel has heightened market anxiety. USD/JPY shows minimal movement following slight gains from the prior day, currently trading near 160.30 during the Asian session on Monday. With the currency pair maintaining a strong position above the significant 160.00 level, market participants are keenly aware of the possibility of government intervention. However, trading exhibited stability after the release of Japan’s first-quarter Gross Domestic Product data for 2026.
Japan’s GDP figures showcased a robust economic performance, with the economy growing by 0.5% quarter-on-quarter. This aligned with the initial flash data, surpassed market expectations of 0.3%, and showed an increase from the 0.2% growth noted in the prior quarter, representing the nation’s most robust quarterly growth since early 2025. In the first quarter of 2026, Japan’s economy experienced an annualised growth rate of 1.8%. While this fell slightly short of the initial 2.1% preliminary estimate, it comfortably outperformed the 1.3% forecast anticipated by experts. It also indicated a notable increase from the adjusted 0.7% growth observed in Q4, achieving the highest annualised growth rate in four quarters. Further reinforcing this economic momentum, separate data revealed that Japanese bank lending rose by 5.7% year-on-year in May 2026, surpassing the 5.6% consensus and indicating the fastest pace of credit growth since March 2021.
This cluster of robust economic indicators has ignited widespread anticipation for monetary tightening. Analysts at Deutsche Bank recently highlighted that the acceleration in wage growth and strong household spending are solidly backing the argument for the Bank of Japan to increase rates. With both real and nominal wages currently climbing at their fastest rates since 2024, futures markets are now indicating a significant likelihood of a rate hike at the upcoming June meeting. Amid escalating tensions in the Middle East over the weekend, the USD/JPY pair exhibits stability. Market anxiety heightened following Iran’s launch of multiple missile waves at northern Israel, marking a significant violation of the delicate April ceasefire. This escalation came in response to an uncoordinated Israeli airstrike targeting a Hezbollah position in Beirut.
Iranian officials have issued a stern warning that any further military action from Israel targeting Lebanon or Iran will provoke a “crushing and comprehensive” response. In an effort to mitigate the situation, US President Donald Trump has taken decisive action by reaching out to Israeli Prime Minister Benjamin Netanyahu, urging him to refrain from executing a retaliatory strike. The White House expresses significant concern that a substantial counterattack could entirely disrupt the fragile, ongoing negotiations between the parties, which President Trump asserts are close to yielding a final agreement with Tehran.