The Japanese Yen approaches a low of ¥155: a warning sign of global capital risk aversion rotation

The economic slowdown in Japan and Switzerland is reshaping global capital flows. As the yen falls to a nine-month low, the exchange rate fluctuations reflect not only monetary policy divergence but also a subtle shift in investors’ asset allocation. With Japan’s GDP contracting at an annualized rate of 1.8% and Switzerland shrinking 0.5% quarterly, high-valuation assets are facing competitive pressure from bonds and gold.

Yen Depreciation Behind the Scenes: The Clash of Economic Weakness and Policy Imbalance

Japan’s economy is experiencing its first negative growth in six quarters. Q3 GDP declined by 1.8% annualized, with a quarter-over-quarter drop of 0.4%, and exports decreased by 4.5% year-over-year. The reduction in Chinese travelers directly impacted the tourism and retail sectors, while sluggish global demand further pressured exports. Similarly, Switzerland’s situation is concerning, with a 0.5% quarterly contraction, as key industries like chemicals and pharmaceuticals face US tariffs, with export declines exceeding 20%.

In this economic context, the yen’s exchange rate has become a market barometer. The USD/JPY currently hits around ¥155, reaching a near nine-month low. The Bank of Japan maintains an accommodative stance, while the US and other developed economies keep interest rates high, expanding the interest rate differential and driving capital flows into the dollar. More critically, market risk appetite has rebounded, stimulating the revival of carry trades, which further exacerbates the yen’s depreciation pressure. Japanese Finance Minister Satsuki Katayama has expressed caution over “one-sided, rapid exchange rate movements,” but actual intervention remains insufficient in the short term.

Geopolitical Tensions and Trade Frictions: Triggers for Safe-Haven Flows

The escalation of US tariffs on export countries, tensions between Japan and China over Taiwan, and increasing travel advisories have pulled geopolitical risks into the market pricing logic. This uncertainty is prompting investors to reassess the attractiveness of risk assets.

High-valuation tech stocks and export-oriented companies are the first to face adjustment pressures, while demand for traditional safe-haven assets rises accordingly. Data shows that the expected annualized return of US stocks over the next 10 years has been revised downward to 3.3%–5.3% (according to Vanguard’s latest estimates), implying limited long-term return potential at current valuation levels. The strong performance of large tech and AI sectors has also raised concerns about “price leading fundamentals.”

Cross-Asset Rotation Accelerates: Opportunities in Bonds and Gold

Bonds Regain Favor

Interest rates are approaching peak levels, with yields at multi-year highs. In this environment, bond yields have returned to reasonable levels relative to risk. BlackRock and Barron’s latest analyses indicate that bonds are becoming increasingly attractive in the current asset rotation, becoming a primary choice for investors shifting from stocks.

Dual Drivers for Gold

Gold has performed remarkably this year, driven by the dual themes of “growth concerns + safe-haven demand.” If inflation begins to decline and the dollar weakens, gold will receive medium-term support. In contrast, the certainty provided by gold far exceeds that of growth stocks in high-valuation environments.

Three Major Risks: Challenging Market Assumptions for Q4 and 2026

Uncertainty in the Interest Rate Path

The Fed’s rate cut expectations continue to be delayed, putting ongoing pressure on growth stock valuations. If interest rates stay high longer, highly leveraged growth companies will face greater challenges.

Sustainability of AI and Tech Themes

If investments in AI chips and data centers do not meet expectations, profit growth for related companies next year could be limited, impacting the valuation logic of the entire tech sector.

Valuation and Fundamentals Divergence Risk

If corporate profit growth cannot be maintained, stock valuations may revert to historical averages. The market’s biggest concern is the “growth is overvalued while interest rates remain stubbornly high” dilemma.

Yen Lows: A Window for Capital Flow Reversal

USD/JPY at about ¥155 has hit a multi-month low. According to MUFG research, if the exchange rate breaks through the key levels of ¥156–158, market fears of further yen depreciation will sharply increase. The yen is not only an exchange rate indicator but also acts as a “sensitive detector” of global capital flows.

As the yen continues to weaken, export-driven economies face pressure, and policy responses are slow. Capital tends to shift first from stocks and growth assets, eventually flowing into bonds and gold as safe havens. If the yen depreciates to ¥157 or lower and the Japanese government does not intervene promptly, the next phase of asset reallocation may quietly begin. Missing the signals at the yen’s low point could mean missing the window for global safe-haven asset allocation.