The yen has weakened 1% to ¥157.2 per dollar since the Iran conflict erupted, defying its traditional role as a safe-haven currency. Traders in Tokyo are bracing for potential government intervention as the currency continues its slide, marking a sharp departure from historical patterns where geopolitical tensions typically triggered yen buying.

Japan's currency has fallen nearly 5% over the past year as markets grapple with Prime Minister Sanae Takaichi's expansive spending plans and the Bank of Japan's reluctance to raise interest rates. The country's commitment to invest $550 billion in the US over three years as part of a trade deal with President Trump is adding further pressure on the yen.

Analysts say the yen's unexpected weakness reflects fundamental shifts in Japan's economy, with companies now investing overseas rather than repatriating earnings during crises. Rising energy prices from the Middle East conflict are increasing Japan's inflation risks, while the Bank of Japan is expected to delay any interest rate hikes. Finance Minister Satsuki Katayama warned of possible currency intervention after the yen tumbled, though downward pressure remains strong as markets adjust to Japan's new economic reality.