Will the weak yen last? How high will Japanese rates go?

In three lines

The yen is worth about a third of its 1995 peak. That is as cheap as in the 1960s, when a dollar bought ¥360, and the lowest since 1970.
Two reasons. Japan kept rates near zero while others did not (the gap blew open when the US began hiking in 2022), and the money Japan earns abroad stays abroad, flowing into companies' and individuals' foreign investments. The much-cited digital deficit is almost cancelled out by tourists' spending.
Currencies this cheap have usually recovered within five years — but nearly half of that came through prices rather than the exchange rate. People who bought foreign assets while the yen was cheap did better hedged (US stocks over five years: 2.3% a year better).

USD/JPY

157.36

29 Sep 2026. A year ago: 149.40

The yen's real value

62.0

Jul 2026. The 1995 peak: 180

10-year JGB yield

3.08%

28 Sep 2026. Highest since 1996

US–Japan rate gap (2-year)

2.56%

Aug 2026 average. A year ago: 2.88%

What happened: the yen lost two-thirds of its value in 30 years

Until 1971$1 = ¥360The rate was fixed by the government
1995$1 = ¥84The yen at its strongest: 2.6× its 1970 real value
Now$1 = ¥157Real value about a third of 1995 — back to the 1960s

Why is ¥157 as cheap as the ¥360 era? For 30 years prices rose every year abroad but barely moved in Japan. Measured by how much foreign goods and services ¥10,000 buys, the yen is back to the 1960s. That is its “real value” — its strength after allowing for prices.

The yen's real value against many currencies, adjusted for inflation (2020 = 100)Higher means a stronger yen. Technically the real effective exchange rate, computed by the BIS against 27 economies.

Show the numbers

Date	Yen real value
Jan 1964	57
Jan 1965	63
Jan 1966	64
Jan 1967	64
Jan 1968	66
Jan 1969	66
Jan 1970	68
Jan 1971	68
Jan 1972	76
Jan 1973	80
Jan 1974	86
Jan 1975	86
Jan 1976	87
Jan 1977	95
Jan 1978	107
Jan 1979	120
Jan 1980	92
Jan 1981	107
Jan 1982	98
Jan 1983	98
Jan 1984	101
Jan 1985	97
Jan 1986	113
Jan 1987	131
Jan 1988	144
Jan 1989	140
Jan 1990	119
Jan 1991	122
Jan 1992	130
Jan 1993	132
Jan 1994	149
Jan 1995	158
Jan 1996	142
Jan 1997	127
Jan 1998	129
Jan 1999	140
Jan 2000	150
Jan 2001	137
Jan 2002	121
Jan 2003	122
Jan 2004	125
Jan 2005	122
Jan 2006	107
Jan 2007	98
Jan 2008	102
Jan 2009	134
Jan 2010	119
Jan 2011	128
Jan 2012	136
Jan 2013	112
Jan 2014	96
Jan 2015	92
Jan 2016	97
Jan 2017	99
Jan 2018	95
Jan 2019	99
Jan 2020	99
Jan 2021	97
Jan 2022	87
Jan 2023	78
Jan 2024	69
Jan 2025	69
Jan 2026	64
Jul 2026	62

Why: interest rates, and money that does not come home

Reason 1: interest rates

104→154

Japan held rates near zero for almost 30 years. When the US hiked hard in 2022, the gap went from +0.3% to +3.6% and the dollar rose from ¥104 to ¥154 over 2021–24. Money goes where interest is higher.

Reason 2: money that stays abroad

¥-1.2 tn

Japan earns ¥42 tn a year abroad, but ¥11 tn stays with subsidiaries, companies invest ¥15 tn abroad and individuals ¥11 tn through funds. Net, the yen is being sold (last 12 months).

Flows that buy (+) and sell (−) yen: last 12 months (to Jul 2026, ¥ trillion)Blue buys yen, orange sells it, green is the net. From the balance of payments (BoJ), keeping only the flows likely to be exchanged.

Show the numbers

	¥ trillion
Goods & services	-2.0
Income (can come home)	+26.6
Corporate investment abroad	-15.1
Investment funds buying abroad	-10.7
Net	-1.2

The much-discussed digital deficit (cloud, streaming, software) is ¥6.5 tn a year — large, but almost cancelled by tourist spending in Japan (¥+6.2 tn).

More: when the rate gap mattered and when it did not, and the flows year by year →

What next: cheap currencies have recovered — not always through the exchange rate

Outside Japan, only 3 countries ever got this cheap (Australia in 2001, Korea in 1998, Mexico in 1983).
Korea's won fell 43% below average in the 1997 crisis and regained +51% in real value within five years.
Across 26 countries, currencies 30%+ below average recovered +31% on average within five years.
But of that recovery (+16%), only +9% came through the exchange rate itself. The rest came “through prices”.

What does “recovering through prices” mean? Think of a burger

Today

The same burger costs ¥500 in Japan and $5 in the US (= ¥787). Japan is 36% cheaper — that is what “a cheap yen” means.

Route A: through the exchange rate

The dollar falls to ¥100. The US $5 becomes ¥500 and prices match.

→ Dollar assets such as US stocks lose 36% in yen.

Route B: through prices

The dollar stays at ¥157. Japan's burger rises to ¥787 (and wages rise too), so prices match.

→ Dollar assets keep their yen value. Instead, yen savings buy less.

In practice A and B happen together. Across 26 countries, roughly half the recovery came through the exchange rate and the rest through prices. Which route it takes decides how holders of foreign assets fare.

More: the 26-country record →

Your money: when you buy decides whether hedging pays

Bought ¥1m of US stocks in	5 yrs later: unhedged	5 yrs later: hedged
Jun 2007Yen cheap・¥123	¥0.65m	¥0.98m
Oct 2011Yen strongest・¥77	¥2.56m	¥1.89m
Dec 2020Recent・¥104	¥2.95m	¥1.68m

Bold marks the better one. US stocks bought with the yen cheap tended to lose value when the yen later rose, so hedging (removing currency swings) paid off. Across every month since 1973, five-year holdings started with the yen cheap did 2.3% a year better hedged. But hedging now costs about 2.7% a year.

More: hedged vs unhedged, what a yen surge costs, tools in Japan →

Premise check: is the weak yen holding?

For a Japanese investor, every foreign gain or loss ends up in yen. Results on the gold, AI and US-stock sites all depend on whether the yen stays this weak. We check that premise every morning in three ways.

Premise: The weak yen will last Intact

The weak yen holds: 1 of the three checks points toward a stronger yen

Toward a stronger yenThe yen's real value is the lowest since 1970 (historically too cheap; pressure to recover is building)
Still weak-yenThe US–Japan 2-year rate gap is 2.56% (a year ago 2.88%, -0.31 points)
Still weak-yenNet yen demand over the last 12 months: ¥-1.2 trillion (more selling than buying of yen)

Rule: two or more of the three pointing to a stronger yen means “wobbling”; the dollar falling 10% or more from its two-year high (¥162) means “broken”. It is now 1.0% below that high.

Why so weak?The rate gap and what sells yen Cheap currencies26 countries: cheap currencies five years on Japanese rates10- and 30-year JGBs, the BoJ, the interest bill Your moneyHedged vs unhedged; what a yen surge costs Expert viewsDBS, Nordea, Mizuho and JRI, checked against the data Gold Premise WatchWhere the US fiscal checks live Supercycle CheckThe 30-year waves in commodity prices

Updated 29 Sep 2026 12:04 JST · real effective rate to Jul 2026 · balance of payments to Jul 2026