The yen withstood the worst of the US dollar’s onslaught on Monday after US President Donald Trump imposed new tariffs, suggesting that investors still see value in the Japanese currency as a haven in times of turmoil.
It advanced as much as 0.3% against the greenback before trading 0.3% lower at 155.61 per US dollar at 12.15pm in Tokyo. The euro was down more than 1% versus the US currency, as were the Canadian, Australian and New Zealand dollars. Japanese government bonds were also bought as the nation’s stocks fell.
The yen’s relative resilience on Monday isn’t a one-off. It’s the only G10 currency to remain higher versus the greenback this year. Elsewhere, signs of flight from risky assets were evident in the declines in equity markets across Asia after Trump carried out his threat to impose general levies of 25% on Canada and Mexico and 10% on Chinese goods, starting on Tuesday.
“The yen is rediscovering its safe haven credentials,” said Gareth Berry, a strategist at Macquarie Bank in Singapore. It’s mainly due to the Bank of Japan being on a hiking path, “but also US Treasury yields are now so elevated that they dip on risk-off, and that sends dollar-yen lower”, he said.
The yen’s course so far in 2025 stands in contrast to its weakening over the past four years, as the wide interest rate gap between Japan and the US kept it under near-constant pressure.
A stronger yen may now give the BOJ more leeway when deciding to add to its recent series of interest rate hikes, thus narrowing the rates gap with the US. Following its increase last month, the central bank is likely to wait until around July to September before its next move, according to economists surveyed by Bloomberg.
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Still, some strategists say it’s unclear whether the yen’s haven appeal will continue given that Japan also could face sudden tariff threats. Prime Minister Shigeru Ishiba is set to meet with Trump later this week, local media have reported, and their conversation may provide more hints about the risk of tariffs and the yen’s path.
Japan has a large trade surplus with the US, “so I’d expect Japan to be an eventual target for tariffs too,” said Win Thin, global head of markets strategy at Brown Brothers Harriman & Co. “In that case, I’d view this drop in dollar-yen as a buying opportunity because the yen is unlikely to be the haven in a trade war.”
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Japan will closely monitor the impact on its currency of Trump’s new tariffs, said Finance Minister Katsunobu Kato on Sunday in an interview with Fuji Television.
The dollar still retains its yield advantage versus the yen, but Japan’s currency is making gains against others as a haven such as the Swiss franc.
The yen’s so-called carry — as measured by three-month forward-implied yields — climbed above zero in late December and has since reached that of the franc for the first time in more than two years.
“The yen is so cheap and the franc is so strong that the yen is preferred,” said Berry. “It helps the yen’s case too that the BOJ is still in tightening mode,” while the Swiss central bank is easing, he said.
Chart: Bloomberg
