Last month, I noticed that the Japanese yen was moving in an interesting direction. The yen has been depreciating for a long time, and now it seems to be reaching a critical turning point.

What caused the yen to weaken over the past few years was Japan's central bank policy. They continued to use Yield Curve Control while other central banks around the world, such as the Fed and the European Central Bank, started raising interest rates. This divergence created pressure for the yen to depreciate.

However, what is understandable is that Japan's economy remains one of the world's key economies. The inflation rate in Japan is between 2.5-3.5%, which is higher than the central bank's 2% target. This is a good sign that policy changes may happen soon.

In 2025, the Bank of Japan began reducing bond purchases, which led to a slight recovery of the yen. The yen/baht pair moved up from 0.2130 to 0.2176. This is a clear rebound from the long-term support level.

Regarding key factors, I see five to watch. First, the Bank of Japan's policy: if they seriously exit YCC and abolish negative interest rates, the yen will strengthen significantly. Second, the policies of other central banks: if the Fed continues to cut rates, the yield differential will narrow, benefiting the yen. Third, economic growth: increasing GDP usually supports the currency. Fourth, the current account balance: if Japan experiences more inflows, the yen will appreciate. Fifth, global risks: the yen is a traditional safe-haven asset. When markets panic, people tend to flock to the yen.

Looking at the long-term chart, the yen/baht has been in a downtrend since 2012. But now, it seems to be consolidating around 0.2150-0.2250. If the support at 0.2150 holds and Japan's economy shows signs of recovery, I expect the yen to gradually strengthen to around 0.2300-0.2400 by 2026.

However, if the Bank of Japan slows down and continues easing policies, the yen could test below 0.2100. Since Thailand benefits from tourism and capital inflows, the baht remains in a good position.

For 2026, I see the key is monitoring Japan's policy signals. If they seriously exit YCC, the interest rate differential with the Fed will change, causing the yen to strengthen. Additionally, Japanese investors might start repatriating funds in 2026 amid global market uncertainties. If geopolitical tensions in Asia increase, the yen could see additional demand as a safe-haven asset.

From a technical perspective, short-term indicators show sell signals, but moving averages remain neutral, indicating no clear trend yet. However, most major indicators point downward, showing strong downside pressure.

Overall, 2026 could be a pivotal year for the yen. Everything depends on whether the Bank of Japan dares to exit easing policies and how the global economy moves. I will closely follow these signals.