Although the USD surged after former President Donald Trump imposed new tariffs on China, Canada, and Mexico, the Japanese yen (JPY) has remained stronger compared to other currencies, indicating that it is gradually regaining its appeal as a safe-haven asset.
The Japanese yen stabilizes amid the financial storm
On Monday morning at #Tokyo , the Japanese yen rose 0.3% against the USD before slightly decreasing by 0.4% to 155.76 JPY/USD. Meanwhile, the euro, Canadian dollar, Australian dollar, and New Zealand dollar all fell more than 1% under pressure from the greenback.
Notably, the JPY is the only currency in the G10 group that has appreciated against the USD since the beginning of 2025, while other currencies are under significant pressure from the interest rate differential between the US and other countries.
Why has the Japanese yen become a bright spot?
According to Gareth Berry, a strategist at #MacquarieBank , the Japanese yen is gradually regaining its reputation as a safe-haven asset for two main reasons:
The Bank of Japan (BOJ) is on a path to raise interest rates, narrowing the gap with the US.
US bond yields are at excessively high levels, and when they decrease during periods of instability, this also contributes to pulling down the USD/JPY exchange rate.
Does the Bank of Japan have more room to raise interest rates?
Previously, #BoJ struggled to raise interest rates due to a weak yen causing import prices to rise, reducing the purchasing power of the public. However, if the yen continues to strengthen, this bank may gradually raise interest rates from July to September, according to a Bloomberg survey.
Akira Takei, an expert at Asset Management One, commented:
"Previously, wages had increased, but high import prices made it difficult for the BOJ to raise interest rates. If the yen stabilizes more, that pressure will ease significantly."
Could the Japanese yen replace the Swiss franc?
Not only strengthening against the USD, the Japanese yen is also competing for safe-haven status with the Swiss franc (CHF). The Carry Index of JPY (measured by the three-month yield) has surpassed the Swiss franc for the first time in over two years.
Berry believes:
"The Japanese yen is cheaper, while the Swiss franc is too strong. Moreover, the BOJ is still on a tightening policy trend, while the Swiss central bank is easing."
In summary
Despite the USD still having an advantage in yields, the Japanese yen is gradually returning as a safe haven amid trade tensions and financial instability. If the BOJ continues to raise interest rates, the yen may strengthen even further, opening up new investment opportunities in the foreign exchange market. 🚀
