Japanese Yen: Driving Factors and Outlook Forecast for 2025-2026

The yen is considered a highly significant currency in the Forex market due to its high trading volume ( ranking 5th in the currency exchange market ) and serving as a safe-haven asset relied upon by investors worldwide. Additionally, the yen represents the Japanese economy, which is the 4th largest in the world, making analysis of yen trends complex and requiring in-depth study.

Driving Factors Behind Yen Trends: 5 Key Factors

Bank of Japan’s monetary policy and yield curve control

The Bank of Japan (BoJ) implements yield curve control (YCC) policy to keep interest rates low. This policy differs from quantitative easing (QE) used by other major economies, as BoJ purchases government bonds to suppress yields to target levels, which impacts the yen to weaken.

Differences in interest rates and policies from other central banks

The US and Europe have raised interest rates to control inflation after 2022-2023, while Japan continues to maintain an accommodative monetary policy. This difference causes the (Interest Rate Differential) to change. When US interest rates rise, the dollar appreciates, and the yen depreciates accordingly.

Economic growth stability of Japan, measured by GDP

Forecast data indicates Japan is expected to maintain its position as the 5th largest economy in the world in 2025, with a GDP of approximately $4.19 trillion. Economic stability is an indicator of the demand for the country’s currency.

International trade balance (Trade Balance)

The current account balance, reflecting the flow of capital in and out of the country, affects exchange rates. A surplus (Surplus) indicates high demand for the currency, leading to appreciation. Conversely, a deficit (Deficit) leads to depreciation.

Safe haven status (Safe Haven) during times of risk

When global financial markets face uncertainty (wars, economic crises, etc.), investors often flock to safe assets like the yen, causing the yen to appreciate rapidly.

Yen/THB Exchange Rate Changes in 2025: Baht Surplus

The yen against the Thai baht in 2025 has attracted significant attention from regional investors, especially as the yen hits historic lows. Currently, the JPY/THB exchange rate is trading at 0.2176 baht per yen, up from the support level of 0.2150.

Since early 2021, the yen has been steadily depreciating, with a 30% decline over the past decade, marking the most severe depreciation since 2020.

However, when the Bank of Japan reduced bond purchases from 9 trillion yen to 7.5 trillion yen in Q2 2025, this sign triggered a slight recovery of the yen, with the JPY/THB exchange rate strengthening from 0.2130 to 0.2176, a technical rebound from the long-term support level.

Meanwhile, the Thai baht remains stable, supported by: a strong recovery in tourism, robust regional trade, and real interest rates that continue to attract foreign capital, keeping downward pressure on the yen per baht.

Latest situation and forecasts for late 2025

If the Bank of Japan continues to exit YCC and inflation remains high, the yen could recover to the range of 0.2250 - 0.2300 by the end of 2025.

However, if signals from the Bank of Japan are unclear and there is no commitment to tighten policies, the yen may test new lows. Investors should closely monitor BoJ policies.

Yen Outlook in 2026: Recovery or New Lows

Long-term outlook for JPY/THB exchange rate

From the long-term chart, the JPY/THB exchange rate has been in a downtrend since the peak in 2012, showing a pattern of decreasing highs and lows.

After falling below 0.2400 in 2023, the pair attempted a reversal but failed to sustain an upward momentum. During 2024-2025, it mostly traded between 0.2150-0.2250.

Forecast for 2026

The latest bullish (Candlestick) pattern in 2025 suggests a potential new low around 0.2150 if this support holds and macroeconomic factors align. The yen could gradually strengthen toward 0.2300-0.2400 in 2026.

However, if the current base cannot be maintained, the yen may test new lows below 0.2100, especially if Japan continues easing policies while Thailand benefits from growth and capital inflows.

Key factors to watch in 2026

Differences in inflation and interest rates between countries

As global inflation pressures stabilize, the US and European central banks are expected to adopt more neutral easing measures. If the Fed continues to cut rates, while Japan gradually normalizes its policies, this differential could support a stronger yen. Conversely, if Japan delays adjustments, the yen may remain weak.

Bank of Japan’s policy direction

BoJ signals the possibility of a significant exit from easing policies. Ending negative interest rates or concretely adjusting YCC could significantly support the yen. Timing and decisiveness remain critical.

Capital repatriation and geopolitical shifts

Japanese institutional investors may repatriate funds in 2026 amid uncertainties in emerging markets. Increased repatriation often supports the yen. Additionally, geopolitical tensions in Asia could boost demand for the yen as a regional safe asset.

Hourly Technical Analysis of JPY/THB Exchange Rate

The hourly chart of JPY/THB shows mixed signals, with most technical indicators pointing to selling (7 out of 13 indicators). Only 1 indicator suggests selling, and 5 are neutral.

The (Moving Average) shows a balanced distribution, with 6 buy signals and 6 sell signals, indicating no clear short-term trend.

However, downward pressure from several technical indicators suggests a short-term bearish bias. Traders should be cautious and observe for potential reversals, especially if long-term support levels are tested.

Summary

The outlook for the yen in 2025-2026 is driven by multiple macroeconomic factors, notably the Bank of Japan’s monetary policy, interest rate differentials, and geopolitical developments.

2025 may be a pivotal year for BoJ policy decisions and could signal alternative directions for the yen trend, as policy moves will influence yen movements, global capital flows, and ultimately the valuation of other assets in the market. Investors monitoring the yen and Japan’s economic situation should keep a close eye on policy announcements and economic data releases.