Japanese yen exchange rate

Prior to the global financial crisis in 2008, near-zero interest rates and a lack of investment opportunities in Japan, combined with Japan's enormous pool of savings (estimated at $15.0 trillion), meant consumers from Japan invested most of their money outside of Japan. As Japan invested in US assets, they sold yen to buy US dollars, pushing down the yen's value in relation to the dollar. Near-zero interest rates in Japan also fostered growth in the yen "carry trade," whereby foreign investors borrowed money from Japanese banks at low-interest rates and invested the funds in riskier, higher-yielding assets in countries with higher interest rates. As investors sold off their borrowed yen to convert it to another currency, the value of the yen dropped further. However, the success of Japanese corporations over the 10 years to 2022, along with the heavy use of the yen as a reserve currency around the world, have kept demand for yen relatively stable despite the depreciative effects of the zero-interest-rate policy.

The yen's value in relation to the dollar, however, rose following the global financial crisis. Global investors rushed to pull their money out of risky investments and into more stable assets. Japanese investors shifted from dollar-denominated assets to buy yen while American investors sold US dollars to repay their yen loans to cover their yen carry trade. Much of the money financing these risky investments originated in Japan (either invested directly by Japanese investors or borrowed from Japanese banks in carry trades), so as more of these loans were called in and had to be repaid, investors were forced to sell dollars and buy yen, raising demand for the currency and fueling its appreciation against the dollar. In early 2011, the Tohoku earthquake and tsunami caused immense damage to Japan's infrastructure and caused the value of the yen to depreciate relative to the US dollar. The cause of this value surge is under debate, with some blaming investors trying to get in front of asset repatriation. Japanese investors currently hold a large share of foreign assets, and would need to convert these back to yen to finance the rebuilding effort. Investors have anticipated this, and have invested in the yen, driving its value up in relation to foreign currencies.

Regardless of the reason, the yen strengthened in value in relation to the dollar, falling below 80.0 yen per dollar, causing potentially damage to Japan's export-centric economy. In 2013, the Japanese government instituted a massive stimulus to end 15 years of deflation. The stimulus caused a significant depreciation of the yen, leading its exchange rate to rise to 116.4 yen per dollar in 2015. The value of the yen increased in 2016, to the detriment of domestic exporters. The fallout from Brexit and political uncertainty caused the yen to gain favor among traders due to its reputation as a safe haven currency. This trend has continued during the later portion of the current five-year period, with US protectionism driving the exchange rate lower.

With the COVID-19 (coronavirus) pandemic leading to global economic ramifications as large sectors of the global economy slowed down, March 2020 experienced a sudden sharp increase of investor inflows to safe haven currencies such as the yen and dollar. As 2020 progressed, a drop in US yields led to Japanese institutional investors pulling out of US Treasury bonds. However, the rise in US 10-year Treasury yields as the US economy recovers has drawn back some Japanese investment at the beginning of 2021. A surge in coronavirus cases in Japan in April and May 2021 also led to expectations of a slower Japanese economic recovery, which has persisted in to the end of the year.

The Japanese economy weakened through the first half of 2021, but avoided a recession due to increased consumer spending despite coronavirus restrictions. Consumer spending was also bolstered by increased investment from the private and public sector, leading Japanese GDP to increase in the second quarter of 2021. Lingering uncertainty regarding coronavirus variants stand in favor of the yen due to its safe haven status. However, the yen depreciated as the Federal Reserve continued its aggressive monetary tightening policy to curb surging inflation in 2022, with the yen extending a 20-year low in the first half of 2022. In 2023 and 2024, the Japanese yen has depreciated substantially, though actions taken by the Trump Administration has led to some appreciation in 2025 .