Japanese Yen Surges To 7-Month Highs, Expects Best Year Since 2010 As Safe-Haven Stampede Intensifies

As gold rips through record highs above $3,500 an ounce, another classic safe haven is quietly staging one of its strongest comebacks in over a decade: the Japanese yen.

With global investors gripped by tariff fears, central bank politicization, and a deteriorating U.S. economic backdrop, Japan's currency has emerged as a stealth winner, rallying 12% year-to-date through April 22—its strongest surge since 2010.

On Tuesday, the USD/JPY pair fell to 140.45, marking its lowest level since September 2024.

A risk-off trade that long seemed forgotten—long yen, short U.S. equities—has returned to form with force.

A strategy betting on the Invesco CurrencyShares Japanese Yen Trust FXY while shorting the SPDR S&P 500 ETF Trust SPY would have delivered a 24% gain since the start of the year.

Political Uncertainty Fuels The Flight To Yen

The deepening standoff between President Donald Trump and Federal Reserve Chair Jerome Powell has rattled global confidence in the U.S. financial assets while boosting flows towards traditional safe havens.

What began as Trump's critique of Powell's monetary policy has escalated into a full-blown power struggle, with Trump openly suggesting he may remove Powell before his term ends in 2026.

On Monday, Trump’s latest Truth Social salvo accused Powell of being "Mr. Too Late" and claimed the Fed Chair had acted politically during the last election cycle.

In this environment, non-dollar safe havens like gold and the yen are soaking up demand. While gold draws headlines with its 30% year-to-date rally, the yen's strength speaks volumes about how global capital is repositioning as U.S. institutions come under pressure.

"The yen is the biggest winner in this latest round of USD selling," said Francesco Pesole, FX strategist at ING. "It responds to both the equity slump and the risks to the Fed's independence."

Analysts See More Upside For The Yen

Pesole doesn't see the yen's rally reversing anytime soon.

"USD/JPY has dropped below the 140 mark and, given the broad attractiveness of the yen as a safe-haven substitute, we don't see the conditions for an immediate reversal," he said, adding that a move toward 135.0 could materialize if currency discussions surface during U.S.-Japan trade talks this week.

Japanese Finance Minister Katsunobu Kato is set to meet U.S. Treasury Secretary Scott Bessent, with currency issues reportedly high on the agenda.

If the Trump administration seeks a trade concession in the form of a weaker dollar vs. the yen, markets could quickly price in further gains for Japan's currency.

Alejandro Cuadrado, strategist at BBVA, indicated that "USD/JPY has the 135.58 2024 low in sight," citing the yen's strength from haven flows, solid fundamentals and a Bank of Japan stance that appears steady even amid global volatility.

Indeed, reports on Monday suggested BoJ officials have no plans to abandon their tightening bias, even as inflation forecasts are expected to be trimmed in light of the stronger yen.

"The yen exuberance remains unchallenged in G10 FX," Cuadrado added. "We believe the pair has room to consolidate at lower levels in the coming months."

Yen Outperforms In VIX Spikes, Even When Yields Rise

Goldman Sachs FX strategist Kamakshya Trivedi highlighted that the yen tends to outperform the dollar during periods of simultaneous bond and equity selloff. That’s particularly the case when the CBOE Volatility Index is elevated.

"The past few days have been more unique—with growing odds of a U.S. downturn coinciding with higher yields and lower equities," Trivedi said.

"When we calculate average USD/JPY returns since 2000 on days when both bonds and equities sell off, the yen tends to outperform—especially when the VIX spikes."

Goldman maintains a 12-month target of 135 for USD/JPY, yet Trivedi noted that deterioration in the U.S. labor market or further market stress could significantly accelerate that timeline.

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