Recently, there has been a very interesting phenomenon worth paying attention to — the Japanese yen has undergone a major shift over the past decade, moving from “a safe-haven haven” to a historically significant depreciation. I looked through the exchange-rate trend over this period and found that it actually reflects Japan and the United States making completely different economic policy choices.

Back in 2012, the yen was still trading at the 80 level against the US dollar. At that time, Japan was the preferred destination for safe-haven funds. But since Shinzo Abe took office and rolled out “Abenomics,” the Bank of Japan began pursuing aggressive monetary easing. In 2013, Haruhiko Kuroda announced a large-scale asset purchase program. Over two years, it injected a currency amount equivalent to $1.4 trillion, and as a result the yen depreciated by nearly 30% in just two years. While this move stimulated the stock market, it also planted the seeds for the yen’s long-term weakness.

The real turning point came in 2021. The Federal Reserve began tightening monetary policy, with US interest rates rising steadily, while the Bank of Japan continued to adhere to ultra-loose policy. After the interest-rate differential widened, a large number of investors started borrowing low-interest yen and switching into higher-yielding US dollar assets. This carry trade drove the yen into a steep, relentless depreciation. By July 2024, the yen-to-US-dollar exchange rate even fell below 161, hitting a 32-year low — this was the moment when the yen reached its lowest level.

What’s interesting is that 2016 had once been the yen’s strongest year. At that time, the Bank of Japan announced negative interest rates, and the weakness in the global economy triggered risk-aversion sentiment. Combined with the panic caused by the UK’s Brexit referendum, money poured into the yen, and the exchange rate at one point surged above 100. Back then, who could have imagined that ten years later, the yen would weaken to this extent?

Last year (2025) was even more dramatic. At the beginning of the year, the Bank of Japan raised interest rates to 0.5%, the highest in 17 years. The yen briefly rebounded strongly, with USD/JPY falling from 158 to around 140. But in the second half of the year, the situation flipped completely. New Prime Minister Sanae Takaichi continued the same “Abenomics” approach of large-scale spending. The market began to worry about Japan’s fiscal situation. At the same time, after Trump took office, his tariff, tax-cut, and fiscal-expansion policies were interpreted as “Trump-style inflation,” pushing up the US dollar index. Even when the Bank of Japan raised rates to 0.75% in December, a new high since 1995, it could not stop the yen’s slump. USD/JPY rebounded by more than 12%, and by year-end it returned to the 155-158 range.

Put simply, the appearance of the yen’s lowest level reflects a deeper problem — Japan’s structural difficulties. High debt, low growth, an aging population, and a heavy reliance on imported energy, along with policy misalignment, have caused the market to remain bearish on the yen for a long time. The greater the divergence between the US and Japan’s central banks in monetary policy, the greater the downward pressure on the yen.

However, from a trading perspective, the yen at its current historical low could indeed present some opportunities. Although the US-Japan interest-rate differential has narrowed, a real interest-rate differential still exists. Japan is still in negative interest-rate territory, which means the logic behind carry trades has not completely disappeared. In the future, the yen’s direction will largely depend on the policy choices of the US and Japan’s central banks, as well as how the global economic situation evolves.

If you’re interested in trading the yen, you may consider monitoring the price action of currency pairs such as USD/JPY on Gate, and make your own trading strategy and risk-control plan before entering the market.