Yen-Baht Exchange 2025-2026: What direction are investors waiting for

In the next two years, investors need to closely monitor changes in the Yen exchange rate as the yen-baht exchange rate is entering a critical phase with significant potential for change. Movements in the Japanese currency not only impact traders in the forex market but also have a direct correlation with stock, bond, and commodity markets.

Remember that the yen remains a major global currency

Japan continues to be among the world’s leading economies. Japan’s GDP is projected to be around $4.19 trillion in 2025, making it the 5th largest economy in the world. The yen accounts for approximately 1 in 5 transactions in the foreign exchange market, and in an uncertain global environment, investors often seek refuge in safe assets, with the yen being one of the trusted options.

Why is the yen depreciating: key factors behind this trend

Interest rate differentials

Japan maintains its policy interest rate at -0.1% and uses the (YCC) (Yield Curve Control) measures, while the US Federal Reserve has begun to keep rates higher. This differential causes investors to seek higher yields elsewhere, attracting capital into the dollar and leading to a decline in the yen.

Divergent economic growth

As US GDP expands faster than Japan’s, there is increased foreign investment flowing into the US. Japan remains in an economic slowdown compared to the US. This dynamic continues to support the baht more than the yen.

Current account balance and currency demand

Countries with a surplus in their current account tend to have a stronger currency. Thailand attracts investment from tourism, regional trade, and foreign capital inflows. These factors help the baht maintain a better bargaining position.

Central bank policies of other countries

When the Fed implements QT (Quantitative Tightening) or raises interest rates, the dollar appreciates, while the ECB’s monetary policy adjustments also support the euro. The yen, however, remains subdued as Japan has not accelerated policy tightening.

Global security tensions

Whether or not they are resolved, international security conflicts can temporarily boost demand for the yen. However, these effects are short-term and insufficient to support the yen in the long run.

Current situation: Yen falls, Baht pushes back

Currently, the JPY/THB exchange rate is trading at 0.2176 baht per yen, near the decade-low of 0.2150. The yen has depreciated over 30% against the baht, with the most significant correction occurring since 2020.

In Q2 2025, the Bank of Japan signaled that it might gradually exit YCC by reducing monthly bond purchases from 9 trillion yen to 7.5 trillion yen. This signal prompted a partial recovery of the yen from 0.2130 to 0.2176, a technical rebound from the long-term support level. However, the upward momentum remains limited, as the baht benefits more from a recovery in tourism, real interest rates, and foreign capital inflows.

Outlook for 2025: A period of potential reset

2025 could be a pivotal year for the yen, with inflation in Japan remaining between 2.5% and 3.5% throughout the year, higher than the Bank of Japan’s 2% target. Nonetheless, the BOJ remains cautious and does not accelerate policy tightening.

Following global inflation peaks in 2022-2023, other central banks have shifted toward easing, but Japan has not. The yen-baht correction within the 0.2150-0.2250 range during 2024-2025 indicates a testing of support levels.

If Japan exits YCC with conviction and inflation remains supportive of tightening policies, the yen could recover slightly to 0.2250-0.2300 by late 2025. Conversely, without clear action, the yen might test new lows below 0.2100.

2026: The real launch of the yen?

Looking at the long-term chart, JPY/THB has been in a downtrend since 2012, with systematically decreasing highs and lows. Below 0.2400 in 2023, the pair attempted to rebound but failed to sustain momentum.

During 2024-2025, most levels hover between 0.2150-0.2250, clearly indicating a rebound test at past support levels. If these levels hold and macroeconomic conditions remain favorable, the yen could strengthen to 0.2300-0.2400 in 2026.

However, if the fundamentals do not support a reversal, the yen may test new lows below 0.2100, especially if Japan maintains its flexible policy stance while Thailand benefits from strong growth and capital inflows.

( Key indicators to watch

Global interest rate differentials

In 2026, as inflationary pressures ease, the Fed and ECB are expected to adopt less hawkish stances. If the Fed cuts rates further while Japan remains cautious or normalizes its financial conditions, the interest rate gap could favor a stronger yen. If Japan delays tightening, the yen will likely continue to weaken.

Next steps for the Bank of Japan

Clear signals such as ending negative rates or adjusting YCC could support the yen significantly. However, timing and the scale of these changes are crucial. Slow and cautious actions may limit the yen’s recovery.

Capital flows and geopolitical risks

Japanese investors may repatriate more funds in 2026 amid emerging market uncertainties. Such repatriation often supports the yen. Additionally, regional tensions in Asia could increase demand for the yen as a safe-haven asset, influencing exchange rates.

A current chart perspective

The hourly chart of JPY/THB shows sell signals despite technical indicators pointing to selling pressure. Moving averages remain neutral. Of 13 analyzed indicators, 7 signal “sell,” only 1 signals “buy,” and 5 are neutral. The moving averages show an equilibrium between 6 “buy” and 6 “sell,” indicating no clear trend in the short term.

However, the negative slope of the indicators reflects downward pressure, suggesting a slight short-term downtrend. Traders should exercise caution. Despite bearish sentiment, excessive sell signals and long-term support levels could indicate a potential reversal if market sentiment shifts.

Summary: What investors should do

The trend of the yen is not to be overlooked, as it is interconnected with other assets such as the dollar, bonds, and Japanese stocks. 2025 may be a critical pivot point in Japan’s monetary policy, shaping a new trend for the yen.

For traders, this is a key window to develop strategies, as these changes could extend to other markets. Monitoring central bank policies, interest rate forecasts, and geopolitical signals is essential for navigating the yen-baht exchange in 2026, leading into 2027. This period will reveal the true future of the yen.