Japanese Yen Depreciation: Characteristics and Forecasts for 2025-2026

The Japanese Yen is one of the main currencies that investors worldwide closely monitor. Not only because it is among the top five most traded currencies in the foreign exchange market( but also because it reflects the economy of Japan, the world’s fourth-largest economy, and serves as a safe-haven asset for international investors.

However, forecasting the trend of the Japanese Yen is not easy, as Japan’s policies and economic conditions differ significantly from other major powers.

Key Factors Driving Changes in the Japanese Yen

)Japan’s Central Bank Monetary Policy

The Bank of Japan employs unique monetary tools different from standard QE measures, such as Yield Curve Control (###YCC(). Japan’s easing monetary policy has led to Yen depreciation against other currencies with higher interest rates.

)International Monetary Policy

Globally, other central banks like the US Federal Reserve (###FED() and the European Central Bank ()ECB() have raised interest rates significantly. This has increased the yield differential between the Yen and other currencies, leading to capital outflows from Japan and a rapid Yen depreciation.

)Economic Growth and GDP

According to reports, Japan is expected to remain around the 5th position globally based on GDP metrics, with an estimated size of approximately $4.19 trillion in 2025. Moderate economic growth signals influence currency demand.

###Current Account Balance

A country with a surplus current account indicates more inflows than outflows, supporting currency strength. Conversely, a deficit exerts downward pressure on the currency.

###Risk Factors

The Yen remains a safe-haven for investors during times of market uncertainty, war, financial crises, etc. However, over the past year, this role has diminished due to internal issues within Japan.

Overview of the Yen/THB in 2025

In 2025, the JPY/THB exchange rate continues to attract attention from investors in Southeast Asia. The pair is trading at around 0.2176 THB per Yen, slightly above the multi-year low of 0.2150.

Since early 2021, the Yen has depreciated significantly. Over the past decade, the JPY/THB exchange rate has fallen by more than 30%, with the most severe depreciation since 2020.

###Financial Environment in 2024-2025

After global inflation peaked in 2022-2023, major central banks began easing monetary tightening. Conversely, Japan remains cautious by nature.

Although inflation in Japan is projected at 2.5% to 3.5% in early 2025—above the Bank of Japan’s 2% target—the institution continues to follow a cautious policy stance, with policy rates remaining at -0.1% and ongoing yield curve control.

###Signs of Yen Weakening Adjustment

Reducing monthly bond purchases from 9 trillion Yen to 7.5 trillion Yen in Q2 2025 has prompted a slight Yen appreciation, with the JPY/THB rate rising from 0.2130 to 0.2176.

Meanwhile, the Thai Baht has maintained stability, supported by a recovering tourism industry, regional cross-border trade, and the ability to attract foreign capital due to favorable real interest rates.

###Forecast Outlook for Late 2025

If the Bank of Japan fully exits YCC and inflation remains high, the Yen may attempt to recover to around 0.2250-0.2300 by the end of 2025.

However, without confident measures, the Yen could continue to weaken to new historic lows. Investors should closely monitor Japan’s policy signals as before.

Yen Outlook for 2026

Looking at the long-term chart, the JPY/THB exchange rate has been in a continuous downtrend since its peak in 2012, with lower highs and lower lows.

After falling below 0.2400 in 2023, the pair has attempted to rebound but has failed to sustain momentum.

During 2024-2025, the exchange rate has mostly fluctuated between 0.2150 and 0.2250, indicating a correction within historical support levels.

Possible Scenarios for 2026

Bullish Scenario: If the current support at 0.2150 holds and global economic factors remain favorable, the Yen could gradually strengthen toward 0.2300-0.2400 in 2026.

Bearish Scenario: If the 0.2150 level cannot hold, the Yen may test new lows below 0.2100, especially if Japan continues easing policies while Thailand benefits from strong growth and foreign capital inflows.

Key Factors to Watch in 2026

###Interest Rate Differentials and Inflation Pressures

As global inflation pressures begin to balance, major central banks are expected to adopt more neutral easing measures. If the Fed continues to cut rates while Japan gradually tightens or normalizes, this differential could support Yen strength.

However, if the Bank of Japan delays rate hikes, Yen depreciation may remain the dominant trend.

###Japan’s Monetary Policy Direction

The Bank of Japan has signaled potential exit from its easing era, including removing negative interest rates or ending YCC. Such steps could lead to a significant Yen appreciation.

Timing and cautious implementation will likely limit sharp Yen gains, especially against currencies like the Thai Baht.

###Capital Flows and Geopolitical Tensions

Japanese institutional investors might repatriate more funds in 2026 amid emerging market uncertainties and global elections. Increased repatriation tends to strengthen the Yen.

Additionally, rising geopolitical tensions in Asia could boost demand for Yen as a regional safe-haven asset, affecting cross-regional exchange rates like JPY/THB.

Short-term Technical Analysis of JPY/THB

The hourly chart of Yen/THB shows initial selling signals. Although technical indicators suggest downward pressure, moving averages remain neutral.

Out of 13 key indicators analyzed, 7 signal “sell,” only 1 signals “buy,” and 5 are neutral. The moving averages are evenly split with 6 “buy” and 6 “sell” signals, indicating no clear short-term trend.

The overall bearish bias in technical indicators suggests short-term downside pressure, with a slight negative tilt.

Traders should exercise caution: despite many sell signals, the long-term support level could trigger a reversal if market sentiment shifts.

Summary

The trend of the Japanese Yen is a crucial factor that international investors should not overlook, as it influences other global assets, including US dollar movements, global bond yields, and the Japanese stock market.

2025 is expected to be a pivotal year for Japan’s monetary policy direction, which will be a key driver of the Yen’s trajectory. This presents an important opportunity for traders and investors to observe and strategize accordingly.