What is JPY (Japanese Yen) in Forex?

Understanding JPY (Japanese Yen) in Forex

JPY (Japanese Yen) is the official currency of Japan and the third most-traded currency in the world. Widely regarded as a primary safe-haven asset, the yen strengthens during periods of market stress, financial uncertainty, or "risk-off" sentiment as investors flee to safety. Japan's status as the world's largest creditor nation and persistent current account surplus underpin the yen's safe-haven characteristics. JPY pairs are heavily influenced by Bank of Japan policy and global risk sentiment.

Major JPY Pairs and Characteristics

USD/JPY is the second most-traded currency pair globally, highly liquid and sensitive to US-Japan interest rate differentials. EUR/JPY, GBP/JPY, and AUD/JPY are popular risk barometers—rising when risk appetite increases, falling during risk-off periods. These crosses often exhibit strong trending behavior. JPY pairs typically quote to two decimal places (e.g., 150.25) compared to four decimals for most other pairs, meaning one pip equals 0.01 rather than 0.0001.

Factors Influencing JPY

The Bank of Japan's ultra-loose monetary policy including negative interest rates and yield curve control creates persistent yen weakness during calm markets. However, this reverses during crises when safe-haven flows overwhelm rate differentials. Carry trade dynamics significantly impact JPY—traders borrow yen at low rates to invest in higher-yielding assets, weakening JPY in stable markets but triggering violent unwinding during stress. Japanese economic data, trade balance, and intervention threats from officials also move the yen.