How to Trade JPY (JPY)

In September 1985, the G5 (US, UK, France, West Germany, Japan) agreed to the Plaza Accord to weaken the US dollar and reduce trade imbalances. The yen strengthened from 250/USD to 120/USD within two years. This hurt Japanese exports, prompting the Bank of Japan to cut rates, which later fueled an asset bubble.

The Nikkei reached an all-time high of 38,915.87 on December 29, 1989, before crashing over 80% within three years. This marked the start of Japan’s 'Lost Decade' as both real estate and stock market bubbles burst—becoming one of the most studied economic bubbles in history.

The Bank of Japan became the first central bank in history to implement a zero interest rate policy in 1999 to combat deflation and stagnation. This led to the 'yen carry trade'—borrowing yen at near-zero rates to invest in higher-yield assets globally.

While the Federal Reserve aggressively raised rates to fight inflation, the BOJ maintained ultra-low rates. This caused the yen to fall to its weakest level in 32 years, exceeding 150 per USD. The BOJ intervened multiple times to stabilize the currency.

The Bank of Japan raised rates in July 2024, triggering a massive unwind of the global yen carry trade. The Nikkei fell over 12% in a single day (August 5, 2024), marking the largest crash since Black Monday 1987. Global markets followed, highlighting the BOJ’s outsized influence.