I’ve been watching the trend of the USD vs. Japanese yen lately. Honestly, the yen is still struggling in a weak range right now. From the beginning of the year until now, the USD vs. Japanese yen has basically been fluctuating back and forth between 152 and 160. As of last week, it has already approached 159. Many people are asking whether the yen will rebound.

Based on my own observations, the yen’s continued depreciation mainly has several reasons. First is the issue of the USD–JPY interest rate differential: U.S. interest rates are far higher than Japan’s, which leads everyone to borrow yen to invest in U.S. dollar assets. As a result, selling pressure from carry trades remains persistent. Second is that the Bank of Japan’s policy shift has been very slow. Although they have been gradually raising interest rates since 2024, the pace is still too conservative. In addition, Japan’s government’s fiscal expansion policies, along with the impact of Middle East tensions on oil prices, have increased Japan’s import costs. With these factors compounded, the yen has kept being pushed lower.

Just look at the Bank of Japan’s moves. They raised rates to 0.5% in January, and then raised them again to 0.75% in December, but market expectations for the April meeting are that they will hold steady—mainly because of instability in the Middle East. However, it’s said that June will be the next key time point. If the Bank of Japan truly raises rates to 1.0% in June, the U.S.–Japan interest rate differential will begin to narrow, which would provide some support for the yen.

As for whether the yen will rebound, institutional views differ. Some believe that in the short term, the yen will continue to trade in a range of 152 to 158, and some even predict it could fall to 164 by the end of the year. But in my view, in the long run, it still depends on whether Japan’s domestic economic fundamentals can improve—especially whether a healthy wage-and-price feedback loop can be established. As long as Japan’s economic growth momentum strengthens, the yen can truly stabilize and hold its ground.

At present, the yen’s short-term rebound potential is limited, but it’s not impossible. If the Federal Reserve starts cutting interest rates, or if Middle East tensions ease and lead to a drop in oil prices, the yen could rebound in the short term. However, for long-term investors, rather than obsessing over whether the yen will rebound, it may be more sensible to focus first on risk management—gradually building positions could be a better approach.