## Why the Japanese Yen Continues to Be Fundamental in Contemporary Forex Markets

Despite constant changes in global geopolitics, the yen maintains its strategic position in international currency operations. To understand this sustained relevance, it is necessary to analyze what makes the Japanese currency so important for both traders and institutional investors.

## The Economic Weight Supporting the Strength of the JPY

The fundamental reason behind the importance of the yen lies in the economic power backing it. Japan ranks as the fourth-largest economy in the world with a GDP of 4.1 trillion euros, surpassed only by the United States (19.4 trillion), China (14.9 trillion), and the Eurozone as a bloc (12.3 trillion). This economic solidity ensures that JPY trading operations maintain constant liquidity and predictable volatility, features that attract professional traders.

The Bank of Japan (BoJ) has been responsible for issuing the currency since its founding in October 1882, operating under mandates that have evolved according to macroeconomic needs. The currency officially began functioning on May 10, 1871, during the Meiji government, with a value structure based on fractions of the yen that allowed divisions into 100 sen and 1,000 rin, conceptually equivalent to cents or pennies of other Western currencies.

## Global Positioning: Third Currency by Trading Volume

In terms of international operations, the JPY ranks third in transaction volume in the Forex market, only behind the US dollar and the euro. This prominence reflects market confidence in Japan’s stability. Alongside this, international currency reserves again position the yen as the third-ranked currency worldwide, demonstrating that it is not only a trading asset but a true tool of global financial policy.

What is interesting is to observe how the Chinese yuan has gained ground in recent years, while currencies like the British pound have seen their relative share in international markets diminish.

## The USD/JPY Pair: Volatility and Trading Opportunities

Among the most traded pairs worldwide, USD/JPY stands out for its consistent volatility and range of movements. This characteristic makes it a preferred instrument for leverage strategies, where brokers like MiTrade offer ratios of up to x200. Sustained liquidity ensures that both bullish and bearish markets present viable profit margins.

## The Safe-Haven Yen Phenomenon: Historical Evidence

The reputation of the yen as a safe-haven asset is supported by observable behaviors during financial crises. There are five pillars explaining this phenomenon:

**First**, Japan maintains a historic trade surplus that protects its economy from internal vulnerabilities. **Second**, domestic interest rates have remained depressed for decades, facilitating inverse carry trade operations during volatility. **Third**, the global perception of Japanese institutional solidity favors defensive investments in JPY. **Fourth**, the country has demonstrated historical capacity to control inflationary pressures, generating prospective confidence. **Fifth**, Japanese cultural idiosyncrasy tends to repatriate capital during international instability, strengthening domestic demand for the currency.

## Three Crises That Validated the Safe-Haven Theory

**The Dotcom Crisis (2000-2001)**: When the NASDAQ fell 72% from its highs of 5,000 points to 1,400, the yen showed early appreciation against the dollar, anticipating turbulence in the US markets.

**The Financial Crisis (2007-2009)**: Here, the most spectacular performance was recorded. From June 2007 to October 2011, the yen appreciated 64% against the dollar while the S&P 500 collapsed 58% from October 2007 to March 2009. This sustained rally confirmed the safe-haven asset theory.

**The COVID Crisis (2020)**: Although the decline was sharper — the S&P 500 fell 35% in less than a month — the yen again showed defensive behavior, remaining within bullish channels even during the most extreme turbulence.

## Recent Dynamics: The Role of the BoJ in 2022

In 2022, while global central banks implemented restrictive policies, the BoJ maintained an accommodative stance, keeping its official interest rate at -0.10% since January 2016. This divergence caused the dollar to appreciate against the yen by over 51% in certain periods.

However, in September 2022, the Japanese central bank implemented a currency buy/sell strategy: selling dollar reserves and buying yen to contain depreciation. These interventions were repeated later, demonstrating their effectiveness in exchange rate stabilization.

## Factors Contributing to JPY Appreciation

The currency strengthens when: the growth forecast for Japan’s GDP improves, export volumes within the trade balance increase, yen holdings in the BoJ’s balance sheet grow, demand from major trading partners such as China, the US, South Korea, and Hong Kong rises, and positive Tankan reports on economic health are published.

## Factors Contributing to JPY Depreciation

Conversely, the yen weakens when: growth forecasts deteriorate, trade disruptions with key partners occur, JPY is oversold in international markets, expansive monetary stimuli are implemented, and signs of economic stagnation appear. The 1990 real estate crisis remains a ghost that affects sentiment toward Japan during times of uncertainty.

## Final Considerations for Traders

The yen is one of the few currencies that combine fundamental economic solidity with exploitable operational volatility. For new investors, demo accounts are the first prudent step before implementing real leverage trading. Precisely because of its volatility, which offers opportunities, rigorous risk management is required in leveraged operations. The USD/JPY pair will continue to be an essential reference in any serious Forex strategy.