Recently, I’ve been looking at the ten-year trend chart of the Japanese Yen and only then realized how dire this once-safe haven has become. From 2012, when the Yen was 80 per US dollar, it has depreciated all the way to around 160 in 2024, and this decline is truly historic.

I’ve summarized several key turning points over these ten years. During the 2011 Great Japan Earthquake, nuclear plant explosions and energy shortages forced Japan to heavily buy US dollars to purchase oil. Coupled with setbacks in tourism and agricultural exports, the Yen started weakening.

The real turning point was in 2012 when Shinzo Abe came to power and launched “Abenomics.” In 2013, the Bank of Japan began large-scale easing, with Haruhiko Kuroda saying he would use all means to stimulate the economy. As a result, the Yen depreciated nearly 30% within two years. Since then, the Yen’s depreciation has never stopped.

In 2021, the Federal Reserve began tightening policies, sparking a surge in carry trades. Investors borrowed low-interest Yen to buy high-yield US dollar assets, increasing the pressure on the Yen to weaken. By 2023, the new Bank of Japan Governor Kazuo Ueda signaled a policy shift, and with Japan’s inflation reaching a 40-year high, markets started to expect interest rate hikes.

But the real shock came in 2024. The Bank of Japan raised interest rates in March and July, and by July, the Yen against the US dollar broke below 161, hitting a 30-year low. The main reason was the huge interest rate differential—over 5% in the US to combat inflation, while Japan remained near zero interest rates—causing arbitrage trades to flood in and drive the Yen sharply lower.

Interestingly, 2025 saw a V-shaped reversal. Early in the year, the Bank of Japan raised rates to 0.5%, and the Federal Reserve also started cutting rates. The Yen temporarily rebounded from 158 to around 140. But later, the dollar rebounded back to 155-158, even hitting a ten-year low. The reason was that although the nominal interest rate gap narrowed, the real interest differential remained negative, and Japan still maintained negative interest rates, so investors preferred borrowing Yen to buy dollar assets.

Adding to this, after the new Prime Minister took office, Japan’s government started massive fiscal spending, raising concerns about Japan’s debt issues. Trump’s tariffs and tax cuts were also interpreted as inflationary drivers, supporting the US dollar index.

Honestly, the fundamental reason for the Yen’s weakness is Japan’s structural problems—high debt, low growth, aging population, and reliance on energy imports. Without addressing these issues, the long-term outlook for the Yen remains bearish. The future direction of the Yen will still depend on the monetary policies of the Bank of Japan and the Federal Reserve. Currently, the Yen is at a historic low, and some investment opportunities may be worth considering, but risks must also be clearly recognized.