USD/JPY, AUD/USD Under Pressure as Stagflation Fears and Oil Shock Hit Asia-Pacific

Asia-Pacific currencies faced significant headwinds as Middle East tensions and energy supply disruptions dominated Thursday's session. The Bank of Japan flagged stagflation risks should the Hormuz Strait oil shock deepen, though officials noted Japan has not yet reached that stage. Japan's wholesale inflation jumped on the back of surging energy costs, while Finance Minister Katayama signaled readiness for decisive action without elaborating on specifics, keeping USD/JPY traders on alert for potential intervention. In China, CPI data for March 2026 pointed to 'bad inflation,' with rising energy costs outpacing demand-driven price gains, suggesting underlying economic weakness persists. Australia moved to secure fuel supplies through Singapore as Hormuz disruption threatened regional energy flows, weighing on AUD sentiment. Doubts over Islamabad talks this weekend added geopolitical uncertainty. Japan's decision to release additional oil reserves and diversify supply routes away from Hormuz provides some stabilization but underscores the severity of the disruption. Traders should monitor energy prices closely, as prolonged supply stress could accelerate JPY safe-haven flows while pressuring commodity-linked currencies like AUD and NZD.