7th July 2026
Why the yen is set to strengthen – and why that matters
Normalising interest rates, among other factors, signpost a strengthening of the yen over the medium and longer term.
After decades of ultra-low rates and a persistently weak currency, Japan’s macro backdrop is starting to shift. As the Bank of Japan (BOJ) gradually normalises policy, the implications extend well beyond the domestic economy. A move away from ultra-easy policy challenges the era of cheap yen funding: investors will have less incentive to borrow in yen and invest abroad. In turn, there are potential knock-on effects for global carry trades and diversification assumptions across asset classes.
In the near term, the yen remains under pressure, trading close to 160 against the dollar despite earlier intervention by the authorities. But the medium-term story looks more constructive: a combination of structural and cyclical forces is building that points to a stronger currency over time.
Not yet registered?
Please complete this form to join our community