From 2021 to 2024 the US raised rates to fight inflation and the rate gap went from +0.3% to +3.6%. The dollar rose from ¥104 to ¥154. Those three years of yen weakness are well explained by rates. But over 50 years since 1976, the gap and the yen moved clearly together only in 2008–12 and 2021–24. In some periods, such as 1985–89, the monthly moves even ran the other way.
The other force is where the money goes. Japan earns ¥42 tn a year abroad, but ¥11 tn stays with overseas subsidiaries, companies put ¥15 tn into factories and acquisitions abroad, and individuals ¥11 tn into foreign stocks through funds. Net, more yen is sold than bought (¥-1.2 tn over 12 months).
The much-cited digital deficit (¥6.5 tn a year) has tripled in a decade, but tourist spending in Japan (¥+6.2 tn) has grown about as much and cancels it.
Still, the flows cannot tell you next year's yen. Before 2015, yearly flows and yearly moves in USD/JPY were barely linked (see the numbers below).
The rate gap does not always matter
“A wider gap means a weaker yen, a narrower one a stronger yen” is the usual story. Across the 50 years since 1976 it held only in certain periods.
USD/JPY (monthly average)Higher means a weaker yen.Show the numbers
Date
USD/JPY
Jan 1977
291
Jan 1978
241
Jan 1980
238
Jan 1981
202
Jan 1982
225
Jan 1983
233
Jan 1984
234
Jan 1985
254
Jan 1986
200
Jan 1987
155
Jan 1988
128
Jan 1989
127
Jan 1990
145
Jan 1991
134
Jan 1992
126
Jan 1993
125
Jan 1994
111
Jan 1995
100
Jan 1996
106
Jan 1997
118
Jan 1998
130
Jan 1999
113
Jan 2000
105
Jan 2001
117
Jan 2002
133
Jan 2003
119
Jan 2004
106
Jan 2005
103
Jan 2006
116
Jan 2007
120
Jan 2008
108
Jan 2009
90
Jan 2010
91
Jan 2011
83
Jan 2012
77
Jan 2013
89
Jan 2014
104
Jan 2015
118
Jan 2016
118
Jan 2017
115
Jan 2018
111
Jan 2019
109
Jan 2020
109
Jan 2021
104
Jan 2022
115
Jan 2023
130
Jan 2024
146
Jan 2025
156
Jan 2026
157
Aug 2026
159
US minus Japan 2-year yieldUS 2-year yield minus Japan 2-year yield.Show the numbers
Date
Gap
Jan 1977
-2.5%
Jan 1978
1.5%
Jan 1980
3.0%
Jan 1981
4.3%
Jan 1982
7.2%
Jan 1983
2.4%
Jan 1984
4.2%
Jan 1985
4.0%
Jan 1986
2.1%
Jan 1987
2.1%
Jan 1988
3.8%
Jan 1989
5.2%
Jan 1990
1.7%
Jan 1991
0.1%
Jan 1992
0.2%
Jan 1993
0.9%
Jan 1994
2.2%
Jan 1995
4.6%
Jan 1996
4.2%
Jan 1997
5.4%
Jan 1998
4.7%
Jan 1999
4.0%
Jan 2000
6.0%
Jan 2001
4.3%
Jan 2002
3.0%
Jan 2003
1.7%
Jan 2004
1.7%
Jan 2005
3.1%
Jan 2006
4.1%
Jan 2007
4.1%
Jan 2008
1.9%
Jan 2009
0.4%
Jan 2010
0.8%
Jan 2011
0.4%
Jan 2012
0.1%
Jan 2013
0.2%
Jan 2014
0.3%
Jan 2015
0.6%
Jan 2016
0.9%
Jan 2017
1.4%
Jan 2018
2.2%
Jan 2019
2.7%
Jan 2020
1.6%
Jan 2021
0.3%
Jan 2022
1.1%
Jan 2023
4.2%
Jan 2024
4.3%
Jan 2025
3.6%
Jan 2026
2.3%
Aug 2026
2.6%
Co-movement by period: monthly changes in the gap vs USD/JPYCloser to 1 means the dollar rose (weaker yen) in months when the gap widened. Below 0.3 is essentially no link. Correlation of monthly changes.Show the numbers
Co-movement (−1 to 1)
1976–84
0.11
1985–89
-0.28
1990–95
0.12
1996–02
0.29
2003–07
0.39
2008–12
0.66
2012–15
0.21
2016–20
0.37
2021–24
0.73
2025–26
0.42
Period
Co-movement
USD/JPY per 1pt of gap
USD/JPY
Gap
1976〜1984
+0.11
+0.4%
299 → 248
-1.6 → +4.1%
1985〜1989
-0.28
-2.1%
254 → 144
+4.0 → +1.8%
1990〜1995
+0.12
+1.2%
145 → 102
+1.7 → +4.8%
1996〜2002
+0.29
+3.0%
106 → 122
+4.2 → +1.8%
2003〜2007
+0.39
+4.0%
119 → 112
+1.7 → +2.4%
2008〜2012
+0.66
+9.1%
108 → 79
+1.9 → +0.2%
2012〜2015
+0.21
+6.8%
81 → 122
+0.2 → +1.0%
2016〜2020
+0.37
+4.3%
118 → 104
+0.9 → +0.3%
2021〜2024
+0.73
+7.3%
104 → 154
+0.3 → +3.6%
2025〜2026
+0.42
+5.2%
156 → 159
+3.6 → +2.6%
Flows that buy and sell yen, year by year
The yen's price also depends on how much of it people want to buy or sell. Keeping only the balance-of-payments flows that actually swap yen for foreign currency, investment abroad by companies and individuals has lately outweighed the trade balance. 2025: ¥-0.2 tn.
What makes up net yen demand (¥ trillion)The bars add up to the black dots (net yen demand). Fund data starts in 2014. * = year to date. The digital deficit and tourism are inside goods & services (see below).Show the numbers
Goods & services
Income that can come home
Corporate investment abroad (−)
Funds buying abroad (−)
Total (net yen demand)
1996
+2
+5
-2
—
+5
1997
+6
+5
-2
—
+9
1998
+10
+6
-2
—
+13
1999
+8
+5
-1
—
+12
2000
+7
+6
-3
—
+10
2001
+3
+7
-3
—
+7
2002
+6
+7
-2
—
+11
2003
+8
+7
-2
—
+13
2004
+10
+8
-2
—
+16
2005
+8
+9
-4
—
+14
2006
+7
+11
-5
—
+13
2007
+10
+13
-4
—
+19
2008
+2
+13
-9
—
+6
2009
+2
+11
-5
—
+8
2010
+7
+11
-5
—
+13
2011
-3
+12
-8
—
+1
2012
-8
+11
-8
—
-5
2013
-12
+14
-11
—
-10
2014
-14
+14
-9
-5
-14
2015
-3
+15
-12
-14
-13
2016
+4
+12
-10
-7
-1
2017
+4
+13
-12
-6
0
2018
0
+14
-9
-2
+3
2019
-1
+14
-18
-3
-8
2020
-1
+12
-5
-6
0
2021
-2
+14
-9
-6
-4
2022
-21
+22
-6
-2
-8
2023
-10
+20
-13
-6
-8
2024
-6
+24
-17
-12
-11
2025
-4
+25
-14
-7
0
2026*
-2
+16
-8
-7
-1
Year
USD/JPY
vs prior year
Goods & services
Income (can come home)
Corporate investment
Funds
Net yen demand
2026*
158.7
+7.0%
-2.0
+15.9
-7.7
-6.9
-0.7
2025
149.6
-1.2%
-4.0
+25.0
-14.5
-6.8
-0.2
2024
151.5
+7.8%
-5.9
+23.8
-17.1
-11.5
-10.8
2023
140.5
+6.9%
-10.0
+20.3
-12.8
-5.5
-8.0
2022
131.5
+19.8%
-21.1
+21.7
-6.0
-2.4
-7.8
2021
109.8
+2.8%
-2.5
+14.2
-9.4
-6.3
-4.0
2020
106.8
-2.1%
-0.9
+12.4
-4.9
-6.1
+0.5
2019
109.0
-1.3%
-0.9
+14.3
-18.0
-3.0
-7.7
2018
110.4
-1.5%
+0.1
+13.8
-9.3
-2.0
+2.6
2017
112.1
+3.1%
+4.2
+13.1
-11.9
-5.8
-0.4
2016
108.8
-10.1%
+4.4
+12.1
-9.9
-7.2
-0.7
2015
121.0
+14.3%
-2.8
+15.2
-12.0
-13.6
-13.2
2014
105.9
+8.5%
-13.5
+13.9
-9.1
-4.8
-13.5
2013
97.6
+22.2%
-12.3
+13.7
-11.3
—
-9.8
2012
79.8
+0.1%
-8.1
+11.2
-7.7
—
-4.6
2011
79.7
-9.2%
-3.1
+11.7
-7.5
—
+1.1
2010
87.8
-6.2%
+6.9
+10.9
-4.6
—
+13.1
2009
93.6
-9.5%
+2.1
+10.6
-4.8
—
+7.9
2008
103.4
-12.2%
+1.9
+12.7
-8.6
—
+6.0
Table from 2008 (¥ trillion, + buys yen). Monthly balance of payments from the BoJ (1996 onward).
The digital deficit and inbound tourism
Digital deficit and travel balance (¥ trillion)Consulting is only broken out from 2014. * = year to date.Show the numbers
Digital (licences, IT, consulting)
Travel (inbound spending − Japanese abroad)
2014
-2.1
0.0
2015
-2.6
+1.1
2016
-2.7
+1.3
2017
-2.6
+1.8
2018
-2.8
+2.4
2019
-3.9
+2.7
2020
-3.8
+0.6
2021
-4.4
+0.2
2022
-4.7
+0.5
2023
-5.9
+3.6
2024
-6.9
+6.1
2025
-6.7
+6.7
2026*
-3.8
+3.7
The digital deficit widened from ¥-2.1 tn in 2014 to ¥-6.7 tn in 2025. Inbound tourism brought in ¥+6.7 tn — about the same size. The digital deficit alone struggles to explain the weak yen.
A surplus that does not come home
Income from abroad, broken down (¥ trillion)Primary income. Even the part that “can come home” is often reinvested in foreign currency, especially bond coupons and dividends.Show the numbers
Can come home (dividends, interest…)
Kept by overseas subsidiaries
1996
6
0
1997
6
0
1998
7
0
1999
6
0
2000
7
1
2001
8
0
2002
7
0
2003
8
1
2004
9
2
2005
10
2
2006
12
2
2007
15
2
2008
14
0
2009
12
1
2010
12
2
2011
13
2
2012
12
2
2013
15
3
2014
16
4
2015
17
4
2016
14
5
2017
15
6
2018
16
6
2019
16
6
2020
15
4
2021
16
10
2022
24
11
2023
24
12
2024
29
11
2025
31
11
2026*
18
6
Most of Japan’s current-account surplus now comes from income abroad rather than exports. But ¥11 tn of it (last 12 months) is profit left with overseas subsidiaries: a surplus on paper that never buys yen.
Updated 29 Sep 2026 12:04 JST · real effective rate to Jul 2026 · balance of payments to Jul 2026