I just整理了一份 Japanese Yen over the past decade's exchange rate trend data, and I’ve noticed some quite noteworthy patterns. From 2012, when 80 yen exchanged for 1 US dollar, to 2024, when it depreciated to around 160, there are many stories behind the yen's sharp decline.

First, let's talk about the recent situation. The July 2024 wave was truly brutal, with the yen briefly falling below 161 yen per dollar, hitting a 32-year low. The main reason for this plunge is the significant divergence in monetary policies between the US and Japan—America, to combat the worst inflation in 40 years, the Federal Reserve has aggressively raised interest rates to over 5% since 2022; meanwhile, the Bank of Japan continues to maintain an accommodative stance, with near-zero interest rates. Investors naturally tend to sell off the low-yield yen and shift into the high-yield dollar, and large-scale arbitrage trading has driven the yen down relentlessly.

Looking further back, the yen's decline can also be traced to 2011. That March, Japan experienced the Great East Japan Earthquake and the Fukushima nuclear disaster, forcing Japan to buy large amounts of US dollars to purchase oil. Coupled with radiation impacts on tourism and agricultural exports, foreign exchange income decreased, and the yen began to weaken.

After Shinzo Abe took office in 2012 and launched "Abenomics," in 2013, under Haruhiko Kuroda’s leadership, the Bank of Japan implemented unprecedented large-scale asset purchase programs, injecting the market with the equivalent of $1.4 trillion over two years. While the stock market responded positively, this easing policy caused the yen to depreciate nearly 30% within two years.

Interestingly, in 2016, the yen actually reached a recent high, with the exchange rate rising to 100-101 yen per dollar. That year, the Bank of Japan announced negative interest rates, which was interpreted as a sign of global economic weakness, sparking risk aversion and capital flowing into the yen. Additionally, in June of that year, the Brexit referendum triggered global panic, prompting investors to flock to the yen as a traditional safe haven, pushing the yen sharply higher.

By September 2021, the Federal Reserve began hinting at tightening monetary policy. Japan, with extremely low borrowing costs, attracted a lot of carry trades—borrowing yen to buy higher-yielding assets and earn interest rate differentials. During periods of global economic growth, the pressure for the yen to depreciate tends to intensify.

In 2023, the new Bank of Japan governor, Kazuo Ueda, indicated potential changes to monetary policy, leading markets to anticipate rate hikes. Coupled with inflation rising above 3.3%, reaching levels not seen since the 1970s, the BOJ started seriously considering raising interest rates.

2024 was indeed a turning point. The BOJ raised rates twice in March and July, bringing the policy rate to 0.25%. However, this was still insufficient to reverse the yen’s downward trend, as the US-Japan interest rate differential remained huge.

Moving into 2025, the situation became more complex. Early in the year, the yen temporarily strengthened, with USD/JPY falling from 158 to around 140, mainly because the BOJ raised rates to 0.5% in January, reaching a 17-year high, and markets preemptively priced in rate hikes. But this appreciation was essentially a technical reaction driven by "policy convergence + narrowing interest rate spreads," not a sign of genuine improvement in Japan’s fundamentals.

In the second quarter, the trend reversed, with USD/JPY rebounding over 12-13%, and by year-end, it returned to the 155-158 range. The reasons include: despite the US cutting rates three times to 3.75% and Japan raising twice, the real interest differential remained negative—Japan still had negative rates—so investors preferred borrowing in low-interest yen to buy high-yield dollar assets. Additionally, Prime Minister Sanae Takaichi continued expansive fiscal policies, raising concerns about Japan’s fiscal health. Meanwhile, Trump’s policies were interpreted as "Trump-style inflation," supporting the US dollar index.

Ultimately, the yen’s decline is rooted in Japan’s structural issues: high debt levels, low growth, aging population, heavy reliance on energy imports, and policy inconsistencies, leading markets to remain bearish on the yen long-term.

Currently, the yen is at a historic low, creating opportunities for some traders. However, forex trading carries risks, and strategies and risk management plans must be carefully crafted. If you're interested in the yen’s trend, you can follow relevant exchange rates on Gate and make your own judgments about opportunities.