Based on my recent monitoring of the currency markets, the trend of the Japanese yen is quite interesting, especially in comparison to the Thai baht, which is a key point that regional investors must keep an eye on at all times.

Why is this important? Because the yen is not just a natural currency; it is one of the five most traded currencies in the foreign exchange market and also serves as a safe-haven asset for investors worldwide. Japan itself is the 4th or 5th largest economy in the world, with a GDP of approximately $4.19 trillion USD. Therefore, analyzing the yen's trend is not an easy task.

The main factors influencing the yen's trend include several variables. First is the monetary policy of the Bank of Japan. They use yield curve control (YCC) measures to suppress long-term bond yields, which injects inflation into the financial system. The result is a depreciation of the yen.

Second are the policies of other central banks, especially the U.S. Federal Reserve. When the Fed raises interest rates, the yield differential between the U.S. and Japan widens, causing the dollar to strengthen and the yen to weaken accordingly.

Third is economic growth measured by GDP. If GDP expands, it usually indicates strong economic activity, increasing demand for that currency. Conversely, countries with sluggish economies tend to see their currencies depreciate.

Fourth is the current account balance. If inflows exceed outflows, it indicates strong demand for that currency. A deficit, on the other hand, leads to currency depreciation.

And finally, global market risks. The yen remains a safe-haven asset that investors turn to during uncertain market conditions.

Looking at the situation in 2025, the JPY/THB exchange rate is trading around 0.2176 THB per yen, slightly above the multi-decade support level of 0.2150. Over the past ten years, the yen has depreciated by more than 30%, marking a significant decline since 2020.

After global inflation peaked in 2022-2023, central banks began easing policies. However, Japan remains cautious. Although inflation in Japan is at 2.5-3.5%, above the Bank of Japan’s 2% target, they continue to maintain a tight policy stance. Interest rates are still at -0.1%, and YCC remains in effect.

Nevertheless, signs of economic recovery in Japan appeared when the Bank of Japan reduced its monthly bond purchases from 9 trillion yen to 7.5 trillion yen in Q2 2025. This change caused the yen to strengthen slightly, appreciating from 0.2130 to 0.2176.

The Thai baht remains relatively stable due to recovering tourism, strong regional trade, and foreign capital inflows, which continue to exert pressure on the yen-to-baht rate.

If the Bank of Japan cautiously exits YCC and inflation remains high, the yen could rebound to around 0.2250-0.2300 by the end of 2025. However, without decisive action, the yen might test new lows.

Looking ahead to 2026, the JPY/THB exchange rate has been in a downtrend since 2012. After falling below 0.2400 in 2023, this pair has attempted to recover but has struggled to sustain upward momentum, mostly trading between 0.2150 and 0.2250.

If the support at 0.2150 holds and economic factors align, the yen could gradually strengthen toward 0.2300-0.2400 in 2026. Conversely, if the current base cannot be maintained, it may test new lows below 0.2100.

Key factors to watch in 2026 include global inflation rates and interest rate differentials. As inflation stabilizes, central banks may adopt more neutral easing measures. If the Fed continues to cut rates while Japan maintains tight policies, this differential could favor a stronger yen.

Another point is the policy direction of the Bank of Japan. If they move away from aggressive easing—such as ending negative interest rates or modifying YCC—this could support a stronger yen. However, timing remains a crucial factor.

Additionally, monitoring the repatriation of Japanese institutional investors’ funds is important. Amid uncertainties in emerging markets and global elections, increased capital repatriation often supports the yen.

Regional geopolitical conflicts in Asia could also boost demand for the yen as a regional safe-haven asset, impacting cross-border exchange rates.

From a recent technical analysis, 13 key indicators were examined: 7 signaling sell, 1 signaling sell, and 5 neutral. The moving averages are evenly split with 6 buy signals and 6 sell signals, indicating no clear short-term trend. However, technical indicators show a downward bias, reflecting downside pressure.

Overall, the yen’s trend is a critical factor that investors should not overlook, as it is highly correlated with other assets, especially the dollar, bond yields, and the Japanese stock market. 2026 could be a pivotal year for Japan’s monetary policy, marking a turning point for the yen’s trajectory. This presents a significant opportunity for traders and investors to closely monitor the currency markets.