Japanese Yen in 2025-2026: What signals should traders watch for

The weakening of the yen in 2023 has become a hot topic that investors worldwide are closely monitoring because the yen is not just an ordinary currency but a key indicator of Japan’s economic health and reflects its connection to the global market. With trading volume ranking in the top 5, the yen also functions as a safe-haven asset during financial crises.

Why is the yen continuously depreciating?

The yen’s depreciation recently is not coincidental but results from differences in monetary policies among central banks. While the US Federal Reserve and the European Central Bank are beginning to ease their tight monetary policies, Japan remains cautious and continues to adjust its yield curve control (YCC) with considerable confidence.

Additional data from the Bank: Japan is the 4th largest economy in the world, with a GDP of approximately $4.19 trillion, expected to rank 5th in 2025. This fact reflects Japan’s status in the global economic system.

Main factors driving the JPY/THB exchange rate

1. Interest rate policies and inflation rates

The value of the yen adjusts according to differences in interest rates between countries. Currently, Japan’s policy interest rate is at -0.1%, while inflation in Japan has been at 2.5%-3.5% since early 2025, exceeding the Bank of Japan’s 2% target.

2. Quantitative easing (QE) policy movements

The Bank of Japan has reduced its monthly bond purchases from 9 trillion yen to 7.5 trillion yen in Q2 2025. This slight change supports the yen’s recovery momentum.

3. Trade balance and demand for the currency

Thailand continues to attract foreign investment, maintaining stability in the baht. Regional tourism and trade are strong, which pushes the yen to depreciate against the baht.

Outlook for 2025

The current JPY/THB exchange rate is 0.2176 baht per yen, slightly above the multi-decade support level of 0.2150. Over the past decade, the yen has depreciated over 30% against the baht.

After the Bank of Japan reduced bond purchases, the yen has slightly rebounded from 0.2130 to 0.2176, which is considered a technical breakout.

Key points to watch in late 2025: If the Bank of Japan decisively exits YCC and inflation remains high, the yen could move to 0.2250-0.2300. However, if monetary tightening slows down, the yen may test new lows.

Forecast for 2026: When major economies change direction

Looking at the long-term trend, JPY/THB has gradually declined since 2012. After falling below 0.2400 in 2023, the yen has attempted to recover but still lacks momentum.

Main signals for 2026:

If the support at 0.2150 holds and economic factors align, the yen could gradually rise to 0.2300-0.2400 in 2026. However, if it cannot hold above the current base, the yen may extend its decline to test new lows below 0.2100, especially if Japan continues monetary easing while Thailand benefits from strong regional growth and foreign capital inflows.

Factors guiding 2026:

1. Interest rate differentials: When global inflation eases, if the Fed cuts rates further while Japan gradually tightens, this differential will support a stronger yen. Conversely, if BOK and BOJ slow their tightening, the yen may remain weak.

2. Signals from the BOJ: Ending negative rates or modifying YCC will send a strong signal for the yen, depending on timing.

3. Capital flows and geopolitical tensions: Japanese institutional investors may repatriate funds amid rising uncertainty. Regional conflicts could increase demand for the yen as a safe-haven asset.

Technical perspective: indicator signals

The hourly chart of JPY/THB shows 7 technical indicators signaling sell, 1 buy, and 5 neutral. Moving averages are evenly split: 6 buy signals and 6 sell signals.

This indicates no clear short-term trend, but the predominantly bearish technical signals suggest downward pressure, implying a short-term bearish trend. However, the high number of sell signals and long-term support levels could indicate a potential reversal if market sentiment shifts.

Summary: 2025-2026 as a turning point for the yen

The yen’s depreciation in 2023-2024 depends on how quickly the BOJ changes its policy. A delay in tightening will keep the yen weak, while significant policy shifts could support a recovery.

Key points traders and investors should monitor:

• BOJ policy announcements each quarter
• JPY/USD interest rate differentials
• Japan’s inflation and growth data
• International capital movements

2025 may become a pivotal year for the yen after a prolonged period of depreciation.