The yen weakened in Tokyo trading on the morning of the 2nd, with the dollar rising from 160.13 yen to 160.39 yen and quoted at 160.19–160.21 yen at 8:30 a.m., down 0.21 yen from the previous day’s 5 p.m. level. Higher crude prices, persistent U.S. interest rates and concerns about Japan’s trade balance fueled yen-selling and dollar-buying. October WTI (West Texas Intermediate crude) settled more than 5% higher on the 1st, above $90 a barrel, after U.S. Central Command confirmed airstrikes against Iran. President Trump warned Iran of harsher and larger-scale attacks if it retaliated and said he was not seeking an agreement. The FedWatch tool showed the probability of a September U.S. rate hike briefly nearing 70%, while the 10-year Treasury yield reached 4.80%, its highest level since January 2025. BOJ Governor Kazuo Ueda said rate hikes would be discussed at every meeting, including the next one, while BOJ Policy Board member Hajime Takata called 2026 a phase requiring greater attention to upside inflation risks. The RBNZ raised its policy rate to 2.75%, and Australia’s April–June 2026 GDP grew 2.1% year-on-year. Japan’s Finance Minister Satsuki Katayama said the government would closely monitor markets and manage bond policy appropriately. Market participants will focus on Middle East developments, U.S. monetary policy and the BOJ’s response, with further oil gains potentially worsening Japan’s trade balance and weakening the yen further.