How will the Japanese Yen investment look in 2026? Will the Japanese Yen reverse today【Complete Trend Analysis】

Core Issue: Why Is the Yen Facing Depreciation Today?

As of November 2025, the USD/JPY exchange rate has fallen below 157, hitting a 34-year low, shocking global investment markets. From a high of 158 at the start of the year to over 156 today, the yen’s depreciation may seem modest, but the underlying market logic is quite complex.

Tracing the entire depreciation cycle, since early 2024, the yen has experienced a continuous weakening for over 10 months. The critical point occurred on October 31, when USD/JPY broke through 150, followed by further weakening in November, completely shattering many investors’ expectations of a yen rebound.

The Three Main Drivers of Yen Depreciation Today

Interest Rate Differential Disparity
The monetary policies of Japan and the US are sharply contrasting. The Bank of Japan’s benchmark interest rate remains at a historic low of 0.5%, while the Federal Funds Rate in the US stays relatively high. This huge interest rate gap directly drives international capital to flow from Japan to the US, creating a sustained “sell yen, buy dollar” trading trend.

Fiscal Policy Uncertainty
The Sano Takashi administration actively implements fiscal stimulus policies, which may boost short-term economic growth but also raise concerns about Japan’s long-term fiscal sustainability. Against the backdrop of global tightening, Japan’s unconventional loose fiscal policy makes investors more bearish on the yen’s prospects.

Arbitrage Trading Pressure
Due to Japan’s prolonged low-interest environment, domestic and foreign investors borrow大量 of yen to carry out arbitrage trades—borrowing yen in Japan to invest in the US or other high-yield assets. With positive global economic expectations, these trades are large-scale, exerting continuous downward pressure on the yen.

Is There Still Hope for the Yen? Outlook Before 2026

Key Turning Point Depends on Central Bank Attitudes

Bank of Japan Governor Ueda Kazuo’s recent parliamentary testimony has been widely interpreted as a potential policy shift signal. He emphasized that the BOJ must closely monitor the risks of a weak yen pushing up import costs and inflation, implying that rate hikes are no longer taboo. If the December BOJ meeting confirms a rate hike path, USD/JPY could plummet sharply, with a target possibly falling back to 150 or even lower.

The Federal Reserve’s Moves Are Crucial

As signs of US economic slowdown become more evident, market expectations for the Fed to cut interest rates are rising. If the Fed begins a series of rate cuts in Q1 2026, the US-Japan interest rate differential will narrow significantly, directly benefiting the yen. Morgan Stanley’s latest forecast indicates that, driven by US slowdown and Fed rate cuts, the yen could appreciate nearly 10% against the dollar in the coming months, with USD/JPY potentially falling back to around 140.

Technical Support Levels

Short-term traders might adopt a “sell on rallies” strategy, setting risk control points at 156.70. If Japanese authorities intervene or the BOJ confirms a rate hike plan, this key resistance level is likely to be broken downward, opening room for further declines.

Evolution of the Bank of Japan’s Policy: From Easing to Shift

March 2024: End of Negative Interest Rate Era
The BOJ decided to end its years-long negative interest rate policy, raising the policy rate from -0.1% to a 0-0.1% range. This was the first rate hike since 2007, marking a major shift in Japan’s monetary policy. However, market reaction was muted, and the yen continued to weaken due to widening US-Japan interest differentials.

July 2024: Unexpected Rate Hike Sparks Turmoil
The BOJ announced a 15 bps hike to 0.25%, exceeding market expectations of a 10 bps increase. This decision triggered global stock market turbulence. The Nikkei 225 fell 12.4% by August 5, and a large-scale yen arbitrage unwind ensued, causing market volatility.

September 2024 to October 2025: Policy Pause Period
Amidst a sharp decline in the stock market and rising global risk aversion, the BOJ decided to pause rate hikes, keeping the benchmark rate at 0.25%. Over six subsequent meetings, the central bank remained on hold, but the yen continued to depreciate as interest differentials widened.

January 2025: Major Rate Hike Return
The BOJ made a significant adjustment, raising the benchmark rate to 0.5%, the largest single increase since 2007. This hike was driven by two factors: CPI rising 3.2% YoY, exceeding expectations, and labor negotiations in fall 2024 reaching a 2.7% wage increase. After the hike, the 10-year government bond yield surged to 1.235%, and the yen briefly strengthened, with USD/JPY dropping sharply from 158 at the start of the year to a low of 140.876 on April 21.

How Should Investors Judge Yen’s Current Trend?

Inflation Data Is the Primary Indicator
Japan’s inflation remains relatively low globally. If CPI continues to rise, the BOJ will be forced to hike rates further, which is positive for the yen; if inflation cools, the easing expectations will re-emerge, and the yen may face short-term pressure.

Economic Growth Data Is Noteworthy
GDP and PMI figures directly reflect Japan’s economic health. Strong data support tightening policies and favor yen appreciation; slowing growth has the opposite effect.

Central Bank Decisions and Officials’ Remarks
Ueda Kazuo’s every public statement can be amplified by markets, triggering short-term exchange rate fluctuations. Investors need to closely monitor central bank signals.

Global Central Bank Interactions
Since exchange rates are relative, policy changes by other major central banks—such as the Fed and the ECB—will influence the yen’s performance.

Safe-Haven Attribute Should Not Be Ignored
The yen traditionally has safe-haven qualities. When geopolitical risks rise or a global economic crisis occurs, investors tend to buy yen for hedging, which can temporarily push the yen higher.

Conclusion: Practical Investment Advice for the Yen Today

Although the US-Japan interest differential remains wide and the yen faces short-term downward pressure, medium- and long-term opportunities are gradually emerging. The market generally believes that the current yen exchange rate is oversold; once the central bank shifts policy or the US economy slows down, the yen could rebound.

For investors with Japanese travel or consumption needs, a phased approach to buying yen is advisable to diversify risk; for those seeking profits through forex trading, clear risk management strategies should be established based on individual risk tolerance. In any case, a deep understanding of the key factors influencing the yen’s trend is essential for making rational investment decisions.