Recently, many people have been discussing the trend of the Japanese yen. Looking back at the exchange rate history over the past 20 years, it’s actually quite interesting. From the historical high in 2012, the yen has been declining all the way to today, going through a rather dramatic journey.

When it comes to the turning points for the Japanese yen, it all starts with the Great East Japan Earthquake in 2011. That earthquake, together with the Fukushima nuclear power plant accident, directly impacted Japan’s energy and economy, and the yen began to weaken. By the end of 2012, Shinzo Abe rolled out “Abenomics,” and the Bank of Japan subsequently announced a large-scale easing policy. After Haruhiko Kuroda took office, he also pledged to inject a large amount of liquidity into the market. Although this set of measures stimulated the stock market, it also caused the yen to depreciate by nearly 30% within just two years.

What’s interesting is that the yen saw a brief period of strength in 2016. That year, the Bank of Japan announced negative interest rates, and the UK’s Brexit triggered global risk-averse sentiment. As a result, funds poured into the yen, and the exchange rate even reached 100 yen per 1 US dollar. But this peak didn’t last for long.

What truly made the yen’s movements complicated was the huge divergence in monetary policies between the central banks of the United States and Japan. Starting in 2021, the Federal Reserve began raising interest rates, which climbed to above 5%. Meanwhile, the Bank of Japan continued to insist on easing, with rates remaining close to zero. This interest-rate differential attracted a large amount of carry trade activity: investors borrowed low-interest yen to buy higher-yielding US dollar assets, putting heavy downward pressure on the yen.

2024 became a turning point. The Bank of Japan raised interest rates in March and July, bringing the rate up to 0.25%. But that wasn’t enough. In early 2025, the central bank became even more aggressive, raising rates to 0.5% and setting a 17-year high. In the short term, the yen did rebound—the exchange rate fell from around 158 to around 140. However, things later reversed again.

By the end of the year, the yen started weakening once more. There were many reasons: although the Federal Reserve cut rates, its rates were still higher than Japan’s; the newly inaugurated prime minister continued the policy of “spending extravagantly,” and the market began to worry about Japan’s fiscal situation; and Trump’s tariffs and fiscal policies were interpreted as likely to raise inflation, which supported the US dollar. As a result, the yen exchange rate returned to the 155–158 range, and even hit a ten-year low.

Looking at the yen’s exchange rate trend chart over the past 20 years, you’ll find that it actually reflects Japan’s deeper economic problems. High debt, low growth, an aging population, and dependence on energy imports—until these structural challenges are addressed, it’s difficult to change market pessimism about the yen by relying on central bank rate hikes alone.

Many people see the yen hitting new lows and think there may be an opportunity. But to be honest, the logic behind this isn’t that Japan’s economy is getting better—it’s driven by global liquidity and policy expectations. To judge the yen’s future trend, you still need to keep an eye on the policy moves of the US and Japan’s central banks, as well as the performance of global risk assets. Short-term volatility will be significant, but in the long run, Japan’s structural problems are still the same old problems.