The Japanese yen explained: safe haven, carry funding, the BoJ and intervention

The Japanese yen is the third most traded currency in the world and behaves differently from most others: it has tended to rise when global markets fall, and for decades it was the cheapest major currency to borrow because the Bank of Japan kept interest rates at or below zero. Those two traits, safe haven and funding currency, together with the Bank of Japan's policy shifts and the Japanese government's willingness to intervene directly, explain most of what moves USD/JPY and the yen crosses.

This guide explains each of these forces, walks through the interventions of 2022 and 2024 and the August 2024 carry-trade unwind, and shows how yen pip values and position sizes work.

The yen in numbers

In the Bank for International Settlements' Triennial Survey of April 2025, the yen was on one side of 16.8% of all foreign exchange trades, behind only the dollar and the euro. USD/JPY is usually the second most traded pair after EUR/USD. Japan is the world's fourth- or fifth-largest economy depending on the measure, with a large manufacturing export sector, heavy reliance on imported energy and food, and a population of savers and institutions that hold very large amounts of foreign assets.

Unlike most currencies, the yen is quoted to two decimal places. A move in USD/JPY from 150.00 to 150.01 is one pip. Our guide to what a pip is explains the conventions.

Why the yen is seen as a safe haven

A safe haven is a currency or asset that tends to hold its value or rise when markets are under stress. The yen has often behaved this way, for reasons that are partly structural and partly about how markets are positioned:

• Japan is a large net creditor. Japanese households, pension funds, insurers and companies have invested heavily abroad over decades, giving the country one of the largest net foreign asset positions in the world. In a crisis, some of that money tends to come home, which means selling foreign currencies and buying yen.
• Carry trades unwind. When investors have borrowed yen to buy higher-yielding assets, a sell-off forces them to close those positions, which means buying yen back. This is covered in the next section.
• Market habit. Because the yen has strengthened in many past sell-offs, traders and algorithms buy it when risk falls, which reinforces the pattern.

The safe-haven label describes a tendency, not a certainty. In 2022 the yen weakened sharply during a year of global market stress, because the gap between rising US rates and Japan's near-zero rates overwhelmed everything else. Treat the yen's haven role as one force among several. The Swiss franc plays a similar role in Europe.

The yen as a funding currency

The Bank of Japan cut rates to near zero in the late 1990s and kept them there for most of the following quarter-century. In 2016 it went further, introducing a negative rate of minus 0.1% on part of banks' reserves, and then adding yield curve control, a policy of holding the 10-year government bond yield near zero.

When a currency's interest rate is close to zero while others are much higher, borrowing in that currency to invest in higher-yielding ones is attractive. This is the carry trade: borrow yen cheaply, buy dollars, Australian dollars or emerging-market currencies, and collect the interest rate difference. For retail CFD traders, a long USD/JPY or AUD/JPY position held overnight has usually earned a positive swap while the rate gap was wide, and a short position has paid one. Our guide to swaps and overnight financing explains how the overnight charge is set.

The catch is that carry trades work until they suddenly do not. The interest earned each day is small; the currency move when everyone heads for the exit at once can be large. The full mechanics are in our guide to the carry trade.

The Bank of Japan

The Bank of Japan (BoJ) sets monetary policy through a nine-member Policy Board that holds eight scheduled monetary policy meetings a year, usually over two days. The decision is released in Tokyo, often around midday local time, with no fixed release minute, and the Governor holds a press conference in the afternoon. The BoJ also publishes a quarterly Outlook Report with its growth and inflation forecasts. Like the Fed and the ECB, it targets 2% inflation.

From negative rates to rate rises

For years, Japanese inflation stayed below target and the BoJ kept policy extremely loose. That changed after 2022, when global inflation and a weak yen pushed Japanese prices up and wage settlements began to rise. In March 2024 the BoJ ended negative rates and yield curve control, raising its policy rate for the first time in 17 years. It raised rates again at the end of July 2024 and has continued to raise them in steps through 2025 and 2026, while keeping them well below US levels.

For traders, the key variable is not the BoJ rate on its own but the gap between Japanese and US rates, and how expectations for that gap change. When markets expect the Fed to cut and the BoJ to hike, the gap is expected to narrow, which has tended to support the yen. When US yields rise relative to Japanese ones, USD/JPY has tended to rise. The guide to interest rate differentials and currencies explains why.

Intervention: when Tokyo steps in

Japan is one of the few major economies that intervenes directly in the currency market. The decision is made by the Ministry of Finance, and the Bank of Japan carries out the trades as its agent. When the yen weakens too fast, officials first warn verbally, using phrases such as "watching with a high sense of urgency" or "will take appropriate action", before actually selling dollars and buying yen.

The recent episodes, based on Ministry of Finance data:

• 22 September 2022: the first yen-buying intervention since 1998, about 2.8 trillion yen, after USD/JPY rose above 145.
• 21 and 24 October 2022: further yen buying, with 21 October alone about 5.6 trillion yen, then a record for a single day. September and October together came to about 9.2 trillion yen.
• 29 April and 1 May 2024: after USD/JPY reached about 160, the yen's weakest level against the dollar since 1990, Japan spent about 9.8 trillion yen over these two days.
• 11 and 12 July 2024: about 5.5 trillion yen more, following softer US inflation data.

The Ministry does not usually confirm an intervention on the day; it publishes monthly totals at the end of the month and daily detail later. So in the moment, traders see a sudden, steep fall in USD/JPY and have to infer what happened.

Intervention can produce moves of several yen within hours, but its lasting effect depends on whether the fundamentals, mainly the interest rate gap, move in the same direction. Interventions against a strong underlying trend have historically bought time rather than reversed it on their own. The glossary entry on intervention has a short definition.

Worked example: intervention risk on a USD/JPY long

Illustrative numbers. A trader with a 5,000 USD account buys USD/JPY at 160.00 near a level where officials have been issuing warnings, with a 40-pip stop at 159.60 and a 1% risk rule (50 USD).

1. Pip value: one standard lot of USD/JPY is 1,000 yen per pip. At 160.00 that is 1,000 ÷ 160 = 6.25 USD per pip.
2. Size: the money per pip needed is 50 ÷ 40 = 1.25 USD, so the position is 1.25 ÷ 6.25 = 0.20 lots.
3. Intervention hits. USD/JPY drops several yen in a short time. In a fast market the stop becomes a market order and may be filled below 159.60. If it fills at 159.20, the loss is 80 pips rather than 40: 80 × 0.20 × 1,000 ÷ 159.20 = about 100 USD, twice the planned risk.
4. Without a stop. If the trader had no stop and price fell to 155.00, the loss would be 500 pips: 500 × 0.20 × 1,000 ÷ 155 = about 645 USD, nearly 13% of the account.

The stop did its job, but at a worse price than planned. Near levels where intervention is being threatened, slippage and gap risk are higher than usual, which argues for smaller positions or staying out. The guides to slippage and gap risk explain why stops are not always filled at their level.

August 2024: a carry unwind in practice

The summer of 2024 is a clear example of what happens when a crowded yen carry trade reverses. Through the first half of the year the yen had been weak and many investors were short yen. On 31 July 2024 the BoJ raised rates again and signalled more to come. Two days later, a weaker than expected US jobs report raised expectations of Fed cuts. The expected rate gap narrowed from both sides at once.

Investors rushed to close short-yen positions, the yen rose sharply, and the selling spread to other markets. On Monday 5 August 2024, the Nikkei 225 fell 12.4%, its largest one-day point drop on record, and volatility jumped across global markets before much of the move retraced in the following days. Our guide to the Nikkei 225 covers the equity side.

The lesson for traders is that the positive swap on a carry position is small compensation for this kind of risk. A position that earned a little each night for months can give back far more in a day.

What moves the yen

• US and Japanese interest rate expectations, especially the gap between US and Japanese government bond yields.
• Global risk appetite: sharp falls in equity markets have often coincided with yen strength.
• BoJ meetings and guidance, including the Governor's press conference and the quarterly Outlook Report.
• Japanese inflation and wages, including Tokyo CPI, which is published before the national figure, and the annual spring wage negotiations.
• Ministry of Finance warnings and intervention, usually when the yen is weakening quickly.
• Energy prices: Japan imports most of its energy, so higher oil and gas prices worsen its trade balance.

Yen pip values and sizing

On any pair quoted in yen, a pip is 0.01 and one standard lot is worth 1,000 yen per pip. To find the value in your account currency, divide by the relevant exchange rate.

Illustrative example for a USD account: a 5,000 USD account risks 1%, or 50 USD, on a USD/JPY trade at 150.00 with a 40-pip stop.

1. Pip value per lot: 1,000 ÷ 150 = about 6.67 USD.
2. Money per pip needed: 50 ÷ 40 = 1.25 USD.
3. Position: 1.25 ÷ 6.67 = 0.1875 lots, rounded down to 0.18 lots.
4. Loss at the stop: 0.18 × 6.67 × 40 = about 48 USD, plus costs and any slippage.
5. Margin at the 30:1 retail limit: 0.18 lots is 18,000 USD, so 18,000 ÷ 30 = 600 USD.

For yen crosses such as EUR/JPY or GBP/JPY, the pip value is the same 1,000 yen per lot, converted into your account currency. Under the ESMA retail rules, USD/JPY, EUR/JPY, GBP/JPY, CHF/JPY and CAD/JPY count as majors and carry the 30:1 cap; AUD/JPY and NZD/JPY are capped at 20:1. The position size calculator handles the conversion for any account currency.

The main yen pairs

• USD/JPY: the most liquid yen pair, driven largely by US-Japan rate expectations. See the USD/JPY profile.
• EUR/JPY: combines the euro with the yen's risk sensitivity. See the EUR/JPY profile.
• GBP/JPY: one of the most volatile liquid crosses. See the GBP/JPY profile.
• AUD/JPY: often watched as a gauge of global risk appetite because it pairs a growth-sensitive currency with a haven. See the AUD/JPY profile.

Common mistakes

• Assuming the yen always rises in a sell-off. It often does, but in 2022 it fell through a period of global stress because rate differentials dominated.
• Treating positive swap as income. The overnight credit on a long USD/JPY position is small compared with the size of a yen squeeze.
• Trading near intervention levels with normal size. Officials' warnings are a sign that a sudden move is possible; spreads and slippage can widen sharply.
• Using the wrong pip size. On yen pairs a pip is 0.01, not 0.0001. Getting it wrong makes position sizes a hundred times too large or too small.
• Ignoring the BoJ release time. The decision does not come at a fixed minute, so a stop placed close to price can be caught in the first move.

Frequently asked questions

Why is the yen considered a safe haven?

Japan holds very large foreign assets, and some of that money tends to be repatriated in a crisis, which means buying yen. Carry trades funded in yen are also closed in a sell-off, adding to yen demand. The pattern is a tendency, not a rule: the yen weakened in 2022 despite global stress.

Why has the yen been weak for long periods?

Mainly because Japanese interest rates stayed far below those in the US and elsewhere, which made the yen cheap to borrow and encouraged money to flow out of Japan into higher-yielding assets. Rising energy import costs also weighed on Japan's trade balance.

When did Japan last intervene in the currency market?

Based on Ministry of Finance data, Japan bought yen in September and October 2022, on 29 April and 1 May 2024, and on 11 and 12 July 2024. Check the Ministry's published intervention data for any later operations.

What is a pip worth on USD/JPY?

On one standard lot, 1,000 yen per pip. In dollars that depends on the rate: about 6.67 USD at 150.00 and 6.25 USD at 160.00. On 0.10 lots it is a tenth of that.

Who decides yen intervention?

Japan's Ministry of Finance decides when to intervene, and the Bank of Japan carries out the transactions on its behalf. The Ministry publishes the amounts after the event.

What happened to the yen in August 2024?

After the Bank of Japan raised rates on 31 July and a weak US jobs report followed, investors rushed to close yen-funded carry trades. The yen rose sharply, and on 5 August the Nikkei 225 fell 12.4% in a day before recovering much of the loss in the following days.