Can I buy Japanese yen now? Investment timing and risk analysis for Japanese yen in 2026

Is it worth buying Japanese Yen? When is the best time to buy? After experiencing intense volatility in 2025, the yen continues to face downward pressure into 2026. This issue troubles many investors with overseas investment plans. Below, we analyze from multiple angles—including current market conditions, central bank policies, and timing—to help you determine whether now is the right time to buy Japanese Yen.

Yen Trend Reversal Fails: Why Does It Keep Depreciating?

At the start of 2026, the yen failed to reverse its 2025 decline. In mid-January, the USD/JPY exchange rate briefly hit 159.454 yen per dollar, a new low for the year. Despite statements from Japan’s Finance Minister and officials aiming to curb yen depreciation, and market speculation about possible intervention, the yen’s rebound was limited, and it weakened again after January 27.

Why is the yen so “uncooperative”? Four main factors are at play:

1. The persistent interest rate gap between Japan and the US. Although the Bank of Japan (BOJ) raised rates twice in 2025, bringing the policy rate to 0.75% in December—its highest in nearly 30 years since 1995—the US interest rates remain significantly higher. This interest rate differential attracts investors to borrow low-yield yen and invest in higher-yield dollar assets, exerting continuous selling pressure. Market expectations for further BOJ rate hikes remain cautious, making it difficult to quickly change this pattern.

2. Japan’s fiscal stimulus policies. Since the new government took office in October 2025, it has continued large-scale fiscal support measures inspired by “Abenomics” to stimulate the economy. However, increased government debt issuance raises concerns about fiscal deficits, heightening market worries about Japan’s long-term fiscal health, which further diminishes yen attractiveness.

3. The relative strength of the US dollar. The US economy remains resilient, with sticky inflation and trade protection policies supporting the dollar index. As a low-yield currency, the yen is more vulnerable to sell-offs in an environment of rising risk appetite.

4. Japan’s economic fundamentals remain weak. Domestic consumption lacks momentum, economic growth stalls at times, and import inflation pushes up prices. Although wages have increased, real purchasing power is still under pressure. This limits the BOJ’s room to raise rates and indirectly sustains the yen’s weakness.

Timing the Purchase: Central Bank Policies vs. Market Expectations

Can you buy yen now? The answer depends on how you view the following three variables:

The pace of BOJ rate hikes

On January 23, the BOJ announced its first policy decision of the year, keeping the benchmark rate at 0.75%. This decision prompted reassessment of the central bank’s future moves. Most expect the next rate hike to occur around mid-2026 or later, targeting about 1%.

After the announcement, the yen briefly fell to 158.61 against the dollar, reflecting disappointment over the BOJ’s cautious stance. Many international banks see 160 yen as a key psychological level—also a trigger point for past interventions in 2024. The subsequent short-lived rebound failed to sustain, and the yen weakened again by month’s end.

The speed of narrowing US-Japan interest rate differentials

If the Federal Reserve (Fed) accelerates rate cuts due to US economic slowdown or persistent inflation, the interest rate gap will narrow quickly, favoring yen appreciation. Conversely, if the Fed proceeds with gradual rate reductions as expected, or US economic data remains solid, the dollar may stay strong, limiting yen gains. The outlook hinges on upcoming US economic indicators.

Global risk sentiment and arbitrage trading flows

The yen, as a low-interest currency, is often used in carry trades—borrowing yen to invest in higher-yield assets—especially when global risk appetite is high. When stock markets or risk assets correct, unwinding these carry trades can trigger rapid yen appreciation. Conversely, if global markets remain stable, capital outflows from the yen may continue.

Institutional Views: Diverging Yen Outlooks for 2026

Major international investment banks have differing forecasts for the yen’s exchange rate at the end of 2026:

Citigroup’s Japan market head, Hoshino Akira, states that the yen’s weakness fundamentally stems from negative real interest rates. Currently, Japanese government bonds yield below inflation, creating a negative real yield environment. To change this, the BOJ must confront this issue directly.

JPMorgan’s FX strategist holds the most bearish view, predicting the yen could fall to 164 by year-end. They believe Japan’s fundamentals remain weak, and this trend will persist into next year. As global investors digest rising interest rates in other economies, the BOJ’s tightening effects will be limited, and cyclical factors may even turn adverse for the yen.

BNP Paribas’s emerging Asian FX and rates strategist expects the yen to dip to 160 by the end of 2026. She argues that the macro environment will likely remain supportive of risk sentiment, sustaining carry trades. Given persistent arbitrage demand, cautious central bank actions, and potentially more hawkish Fed stance, USD/JPY may stay elevated.

Decision Framework: Is Now a Good Time to Buy Yen?

Based on the above analysis, here’s a decision framework to assess whether it’s suitable to buy yen now:

Suitable scenarios for buying now:

• You have concrete plans for travel or consumption in Japan within 1-2 years and do not expect extreme volatility
• You believe the BOJ will accelerate rate hikes and expect yen to appreciate in the medium term
• You plan to buy gradually (monthly or quarterly small amounts) rather than a lump sum
• You anticipate a significant slowdown in the US economy leading to rapid Fed rate cuts

Situations where caution is advised or not recommended:

• You seek short-term gains from exchange rate movements within 3 months
• You intend to hold yen as your main foreign currency without diversification
• You have limited risk tolerance for global economic uncertainties
• You lack understanding of macroeconomic indicators and central bank policies

Key Factors to Watch Before Investing in Yen

To accurately forecast yen’s future, monitor these three core indicators:

1. Inflation Data (CPI)
Inflation rates directly influence central bank policy. If global inflation remains high, the BOJ may be compelled to hike rates faster, boosting the yen. If inflation cools, rate hikes may slow, putting short-term pressure on the yen. Japan’s inflation remains relatively low compared to other economies, which explains the cautious pace of BOJ tightening.

2. Economic Growth Data (GDP, PMI)
Japan’s GDP and manufacturing PMI reflect economic health. Strong data suggest room for tightening, supporting yen appreciation; weak data imply continued easing and yen weakness. Japan’s growth is relatively stable among G7 nations but not robust.

3. Central Bank Statements and Policy Expectations
The BOJ governor’s speeches are closely watched. Any hints of policy shifts can cause short-term volatility. Monitoring official language changes can provide early signals of upcoming policy adjustments.

Risks and Opportunities in Yen Investment

Risks:

• Short-term volatility driven by central bank comments, US policy, or geopolitical events
• Unexpected rate hikes by the BOJ could trigger sudden yen appreciation
• Global recession risks may push the yen higher as a safe haven, but overall asset values could decline

Opportunities:

• Long-term positioning: Yen is likely to revert to fair value over 3+ years, ending its persistent depreciation
• Dollar-cost averaging: current low levels offer a good entry point for gradual accumulation
• Japanese assets: weaker yen makes Japanese stocks and bonds more attractive to foreign investors
• Safe-haven appeal: in case of global instability, yen’s traditional role as a safe haven could reassert itself

Investment Tips and Risk Management

For those with immediate Japanese consumption needs:
Use dollar-cost averaging—buy a third of your planned amount each month—to mitigate timing risks. Avoid lump-sum purchases to handle short-term fluctuations.

For forex traders:
Deeply analyze central bank policies, economic data, and interest rate differentials. Build your own judgment framework, consider your risk appetite, and consult professionals if needed. Set stop-loss levels to manage sudden market swings.

For long-term asset allocators:
Yen can be a stable component of a diversified currency portfolio. Avoid over-concentration; balance with other major currencies like USD and EUR.

Summary: Can You Buy Yen Now? Yes, But How You Buy Matters

In short, yen is buyable now, but the key is “how” rather than “whether.”

The main constraints on yen strength remain the slow pace of BOJ rate hikes and its cautious stance. However, from a long-term perspective, the yen will eventually return to fair value, and its prolonged depreciation trend will reverse.

If you plan to travel or spend in Japan, gradual purchases are prudent. For investors seeking profit through forex trading, understanding market risks and following the analysis framework above is essential. Always tailor your plan to your risk tolerance and seek professional advice if necessary. Remember: prudent evaluation before any investment decision is paramount.